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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, 2000
Commission File Number 0-13358
CAPITAL CITY BANK GROUP, INC.
Incorporated in the State of Florida
I.R.S. Employer Identification Number 59-2273542
Address: 217 North Monroe Street, Tallahassee, Florida 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 9, 2001, there were issued and outstanding 10,759,041
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 9, 2001, was $130.1 million.
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 2000 ON FORM 10-K
TABLE OF CONTENTS
PART I PAGE
- ------ ----
Item 1. Business 3
Item 2. Properties 16
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
PART II
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Item 5. Market for the Registrant's Common Equity and Related
Shareowner Matters 16
Item 6. Selected Financial & Other Data 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 40
Item 8. Financial Statements and Supplementary Data 42
Item 9. Changes in and Disagreement with Accountants on Accounting
and Financial Disclosure 69
PART III
- --------
Item 10. Directors and Executive Officers of the Registrant 69
Item 11. Executive Compensation 69
Item 12. Security Ownership of Certain Beneficial Owners and
Management 69
Item 13. Certain Relationships and Related Transactions 69
PART IV
- -------
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 69
PART I
Item 1. Business
General
Capital City Bank Group, Inc. ("CCBG" or "Company"), is a financial
holding company registered under the Gramm-Leach-Bliley Act of 1999
("Gramm-Leach-Bliley Act") and is subject to the Bank Holding Company
Act of 1956. At December 31, 2000, the Company had consolidated total
assets of $1.5 billion and shareowners' equity of $147.6 million. Its
principal asset is the capital stock of Capital City Bank ("CCB") and
First National Bank of Grady County ("FNBGC") (collectively, the
"Banks"). CCB accounted for approximately 94% of the consolidated
assets at December 31, 2000, and approximately 92% of consolidated net
income of the Company for the year ended December 31, 2000. In
addition to its banking subsidiaries, the Company has five 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, and First Insurance Agency of Grady County, which
is a wholly-owned subsidiary of First National Bank of Grady County.
During the first quarter of 2001, the Company plans to complete its
acquisition of First Bankshares of West Point, Inc., and its
subsidiary First National Bank of West Point. First National Bank of
West Point is a $155 million financial institution with offices
located in West Point, Georgia, and two offices in the Greater Valley
area of Alabama. First Bankshares of West Point, Inc. will merge with
CCBG, and First National Bank of West Point will merge with CCB. The
Company will issue 3.6419 shares and $17.7543 in cash for each of the
192,481 shares of First Bankshares of West Point, Inc. The
transaction will be accounted for as a purchase and result in
approximately $5.0 million of intangibles, primarily goodwill. These
intangible assets will be amortized over fifteen years.
During the first quarter of 2001, the Company plans to complete its
purchase and assumption agreement with First Union National Bank
("First Union") to acquire six of First Union's offices which includes
real estate, loans and deposits. The transaction will create
approximately $11.5 million in intangible assets which will be
amortized over 10 years. The Company agreed to purchase approximately
$26 million in loans and assume deposits of approximately $109 million.
On May 7, 1999, the Company completed its acquisition of Grady Holding
Company and its subsidiary, First National Bank of Grady County in
Cairo, Georgia. FNBGC is a $119 million asset institution with offices
in Cairo and Whigham, Georgia. The Company issued 21.50 shares for each
of the 60,910 shares of FNBGC. The consolidated financial statements
of the Company give effect to the merger which has been accounted for
as a pooling-of-interests. Accordingly, financial statements for the
prior periods have been restated to reflect the results of operations
of these entities on a combined basis from the earliest period presented.
On December 4, 1998, the Company completed its first purchase and
assumption transaction with First Union and acquired eight of First
Union's offices which included deposits. The Company paid a premium
of $16.9 million, and assumed approximately $219 million in deposits
and acquired certain real estate. The 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 offices which included loans and deposits. The Company paid
a deposit premium of $3.6 million and assumed $55 million in deposits
and purchased loans equal to $44 million. Four of the five offices
were merged into existing offices of CCB. The deposit premium is
being amortized over fifteen years.
Dividends and management fees received from the Banks are the
Company's only source of income. Dividend payments by the
subsidiaries to CCBG depend on the capitalization, earnings and
projected growth of the subsidiaries, and are limited by various
regulatory restrictions. See the section entitled "Regulatory
Considerations" and Note 14 in the "Notes to Consolidated Financial
Statements" for additional information.
The Company had a total of 791 (full-time equivalent) associates at
March 9, 2001. Page 17 contains other financial and statistical
information about the Company.
Banking Services
CCB is a Florida chartered bank and FNBGC is a national bank. The
Banks are full service banks, engaged in the commercial and retail
banking business, including accepting demand, savings and time
deposits; extending credit; originating residential mortgage loans;
and providing data processing services, asset management 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 Banks are members of the "Star" ATM Network 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 and Georgia.
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 9, 2001, the services company is providing
computer services to six 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, IRA's and personal
investment management accounts. Administration of pension, profit
sharing and 401(k) plans is a significant product line. Associations,
endowments and other non-profit entities hire the Trust Company to
manage their 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 $328 million as
of December 31, 2000, with total assets under administration exceeding
$374 million.
Brokerage Services
The Company offers access to retail investment products through
Capital City Securities, Inc., a wholly-owned subsidiary of Capital
City Bank. These products are offered through INVEST Financial
Corporation, member NASD and SIPC. Non-deposit investment and
insurance products are: not FDIC insured; not deposits, obligations,
or guaranteed by any bank; and are subject to investment risk,
including the possible loss of principal amount invested. Capital City
Securities, Inc.'s brokers are licensed through INVEST Financial
Corporation, and offer a full line of retail securities products,
including U.S. Government bonds, tax-free municipal bonds, stocks,
mutual funds, unit investment trusts, annuities, life insurance and
long-term health care. CCBG and its subsidiaries are not affiliated
with INVEST Financial Corporation.
Competition
The banking business is rapidly changing and CCBG and its subsidiaries
operate in a highly competitive environment, especially with respect
to services and pricing. Consolidation of the industry 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 seventeen counties in Florida and one county in
Georgia. In these markets, the Banks compete 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 $507
million, or 40.0%, of the Company's consolidated deposits at
December 31, 2000.
The following table depicts CCBG's market share percentage within each
respective county, based on total commercial bank deposits within the
county.
Market Share
as of September 30(1)(2)
2000 1999 1998
------------------------------
Capital City Bank:
Bradford County(3) 45.8% 46.1% 53.3%
Citrus County 3.8% 4.2% 4.3%
Clay County(3) 4.1% 4.6% 5.8%
Dixie County 14.2% 15.2% 15.7%
Gadsden County 27.9% 29.0% 28.0%
Gilchrist County 48.3% 50.0% 50.5%
Gulf County(3) 43.3% 39.8% 48.6%
Hernando County 1.6% 2.2% 2.0%
Jefferson County 28.9% 24.7% 27.1%
Leon County 21.5% 21.6% 23.4%
Levy County 36.5% 37.4% 37.7%
Madison County 21.2% 21.5% 20.6%
Pasco County 1.1% 1.6% 1.2%
Putnam County(3) 22.3% 24.2% 30.3%
Suwannee County 19.3% 20.5% 18.7%
Taylor County 35.1% 33.6% 32.7%
Washington County(3) 22.6% 23.9% 30.0%
First National Bank of Grady County
Grady County(4) 43.5% 44.5% 49.0%
(1) Obtained from the September 30 Office Level Report published by
the Florida Bankers Association for each year.
(2) Does not include Alachua county where Capital City Bank maintains
a residential mortgage lending office.
(3) Entered the market in December 1998.
(4) Obtained from the June 30 FDIC/OTS Summary of Deposits Report.
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, 2000.
Number of Number of Commercial
County Commercial Banks Bank Offices
- --------------------------------------------------------------
Florida:
Bradford 3 3
Citrus 8 38
Clay 9 24
Dixie 3 4
Gadsden 4 8
Gilchrist 2 4
Gulf 2 3
Hernando 11 31
Jefferson 2 2
Leon 12 61
Levy 4 12
Madison 5 5
Pasco 18 84
Putnam 5 11
Suwannee 4 5
Taylor 3 4
Washington 3 3
Georgia:
Grady(1) 6 10
(1) Obtained from the June 30 FDIC/OTS Summary of Deposits Report.
Other Matters
As part of its card processing services operation, the Bank has
relationships with several Independent Sales Organizations ("ISOs").
A small number of one ISO's merchants have generated large amounts
of charge-backs, and have not reimbursed the ISO for this charge-back
activity. Should these charge-backs exceed the financial capacity of
the ISO, the Bank could face related exposure. In addition, the ISO
and certain merchants may have disputes about reserves placed with
the ISO. The Bank is currently involved in a workout strategy with
the ISO related to charge-back issues, which management believes
substantially mitigates the Bank's potential exposure. The issues
are still in their earliest stages and the Bank cannot reasonably
estimate potential exposure for losses, if any, at this time.
Management does not believe the ultimate resolution of these issues
will have a material impact on the Company's financial position or
results of operations.
REGULATORY CONSIDERATIONS
The Company and the Banks must comply with state and federal banking
laws and regulations that control virtually all aspects of operations.
These laws and regulations generally aim to protect depositors, not
shareowners. Any changes in applicable laws or regulations may
materially affect the business and prospects of the Company. Such
legislative or regulatory changes may also affect the operations of
the Company and the Banks. The following description summarizes some
of the laws and regulations to which the Company and the Banks are
subject. References herein to applicable statutes and regulations are
brief summaries, do not purport to be complete, and are qualified in
their entirety by reference to such statutes and regulations.
The Company
General
The Company is registered as a financial holding company under the
Gramm-Leach-Bliley Act and is subject to the Bank Holding Company Act
of 1956 ("BHCA"). As a result, the Company is subject to supervisory
regulation and examination by the Board of Governors of the Federal
Reserve System (the "Federal Reserve"). The Gramm-Leach-Bliley Act,
the BHCA and other federal laws subject financial holding companies to
particular restrictions on the types of activities in which they may
engage, and to a range of supervisory requirements and activities,
including regulatory enforcement actions for violations of laws and
regulations.
Financial Holding Companies
- ---------------------------
Permitted Activities. On November 12, 1999, President Clinton signed
into law the Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act
repealed two anti-affiliation provisions of the Glass-Steagall Act:
Section 20, which restricted the affiliation of Federal Reserve Member
Banks with firms "engaged principally" in specified securities
activities; and Section 32, which restricted officer, director, or
employee interlocks between a member bank and any company or person
"primarily engaged" in specified securities activities. In addition,
the Gramm-Leach-Bliley Act contained provisions that expressly
preempted most state laws restricting state banks from owning or
acquiring interests in financial affiliates, such as insurance
companies. The general effect of the law was to establish a
comprehensive framework to permit affiliations among commercial banks,
insurance companies, securities firms, and other financial service
providers. A bank holding company may now engage in a full range of
activities that are financial in nature by electing to become a
"Financial Holding Company." Activities that are financial in nature
are broadly defined to include not only banking, insurance, and
securities activities, but also merchant banking and additional
activities that the Federal Reserve, in consultation with the
Secretary of the Treasury, determines to be financial in nature,
incidental to such financial activities, or complementary activities
that do not pose a substantial risk to the safety and soundness of
depository institutions or the financial system generally.
The Gramm-Leach-Bliley Act also permits national banks to engage in
expanded activities through the formation of financial subsidiaries.
A national bank may have a subsidiary engaged in any activity
authorized for national banks directly or any financial activity,
except for insurance underwriting, insurance investments, real estate
investment or development, or merchant banking, which may only be
conducted through a subsidiary of a financial holding company.
Financial activities include all activities permitted under new
sections of the BHCA or permitted by regulation.
In contrast to financial holding companies, bank holding companies are
limited to managing or controlling banks, furnishing services to or
performing services for its subsidiaries, and engaging in other
activities that the Federal Reserve determines to be so closely
related to banking or managing or controlling banks as to be a proper
incident thereto. Except for those activities that are now permitted
for financial holding companies by the Gramm-Leach-Bliley Act, these
restrictions will apply to the Company. In determining whether a
particular activity is permissible, the Federal Reserve must consider
whether the performance of such an activity reasonably can be expected
to produce benefits to the public that outweigh possible adverse
effects. Possible benefits include greater convenience, increased
competition and gains in efficiency. Possible adverse effects include
undue concentration of resources, decreased or unfair competition,
conflicts of interest and unsound banking practices. The Federal
Reserve has determined the following activities, among others, to be
permissible for bank holding companies:
* Factoring accounts receivable;
* Acquiring or servicing loans;
* Leasing personal property;
* Conducting discount securities brokerage activities;
* Performing certain data processing services;
* Acting as agent or broker and selling credit life insurance and
certain other types of insurance in connection with credit
transactions; and
* Performing certain insurance underwriting activities.
There are no territorial limitations on permissible non-banking
activities of financial holding companies. Despite prior approval,
the Federal Reserve may order a holding company or its subsidiaries to
terminate any activity or to terminate ownership or control of any
subsidiary when the Federal Reserve has reasonable cause to believe
that a serious risk to the financial safety, soundness or stability of
any bank subsidiary of that bank holding company may result from such
an activity.
Changes in Control. Subject to certain exceptions, the BHCA and the
Change in Bank Control Act, together with regulations thereunder,
require Federal Reserve approval (or, depending on the circumstances,
no notice of disapproval) prior to any person or company acquiring
"control" of a financial holding company, such as the Company. A
conclusive presumption of control exists if an individual or company
acquires 25% or more of any class of voting securities of the
financial holding company. A rebuttable presumption of control exists
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 Securities Exchange Act of 1934, as amended,
or no other person will own a greater percentage of that class of
voting securities immediately after the transaction.
The BHCA requires, among other things, the prior approval of the
Federal Reserve in any case where a financial 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 financial holding company or bank holding company.
Under Florida law, a person or entity proposing to directly or
indirectly acquire control of a Florida bank must first obtain
permission from the State of Florida. Florida statutes define
"control" as either (a) indirectly or directly owning, controlling or
having power to vote 25 percent or more of the voting securities of a
bank; (b) controlling the election of a majority of directors of a
bank; (c) owning, controlling or having power to vote 10 percent or
more of the voting securities as well as directly or indirectly
exercising a controlling influence over management or policies of a
bank; or (d) as determined by the Florida Department of Banking and
Finance (the "Florida Department"). These requirements will effect
the Company because CCB is chartered under Florida law and changes in
control of the Company are indirect changes in control of CCB.
Similar change in control provisions apply to FNBGC under Federal law.
Tying. Financial holding companies and their affiliates are
prohibited from tying the provision of certain services, such as
extending credit, to other services offered by the holding company or
its affiliates.
Capital; Dividends; Source of Strength. The Federal Reserve 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 either Bank, and such loans may be
repaid from dividends paid from the bank to the Company. The ability
of the bank to pay dividends, however, will be subject to regulatory
restrictions which are described below under "Dividends." The Company
is also able to raise capital for contributions to the Banks by
issuing securities without having to receive regulatory approval,
subject to compliance with federal and state securities laws.
In accordance with Federal Reserve policy, the Company is expected to
act as a source of financial strength to the Banks and to commit
resources to support the Banks in circumstances in which the Company
might not otherwise do so. In furtherance of this policy, the Federal
Reserve may require a financial holding company to terminate any
activity or relinquish control of a nonbank subsidiary (other than a
nonbank subsidiary of a bank) upon the Federal Reserve's determination
that such activity or control constitutes a serious risk to the
financial soundness or stability of any subsidiary depository
institution of the financial holding company. Further, federal bank
regulatory authorities have additional discretion to require a
financial 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.
Capital City Bank
CCB 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 Florida Department. The Florida Department supervises and
regulates all areas of CCB's operations including, without limitation,
making of loans, the issuance of securities, the conduct of CCB's
corporate affairs, capital adequacy requirements, the payment of
dividends and the establishment or closing of branches. CCB is also a
member bank of the Federal Reserve System and its operations are also
subject to broad federal regulation and oversight by the Federal
Reserve. CCB's deposit accounts are insured by the FDIC to the
maximum extent permitted by law, and the FDIC has certain enforcement
powers over CCB.
As a state chartered banking institution in the State of Florida, CCB
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 CCB's customers. Various consumer laws and regulations
also affect the operations of CCB, including state usury laws, laws
relating to fiduciaries, consumer credit and equal credit laws, and
fair credit reporting. In addition, the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") prohibits insured state
chartered institutions from conducting activities as principal that
are not permitted for national banks. A bank, however, may 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.
First National Bank of Grady County
FNBGC is a national bank which is chartered by the Office of the
Comptroller of the Currency ("OCC") and operates in Grady County,
Georgia. FNBGC is subject to supervision, regulation and examination
by the OCC, which monitors all areas of the operations of FNBGC,
including reserves, loans, mortgages, issuances of securities, payment
of dividends, establishment of branches, capital adequacy, and
compliance with laws. FNBGC's deposit accounts are insured by the
FDIC to the maximum extent permitted by law, and the FDIC has certain
enforcement powers over FNBGC.
As a national bank operating in the State of Georgia, FNBGC 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 FNBGC's customers. Various consumer laws and regulations
also affect the operations of FNBGC, including state usury laws, laws
relating to fiduciaries, consumer credit and equal credit laws, and
fair credit reporting.
Reserves
The Federal Reserve 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 Federal
Reserve may be used to satisfy liquidity requirements.
Institutions are authorized to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve regulations require
institutions to exhaust other reasonable alternative sources of funds
before borrowing from the Federal Reserve Bank.
Dividends
The Banks are subject to legal limitations on the frequency and amount
of dividends that can be paid to the Company. The Federal Reserve may
restrict the ability of CCB and the OCC may restrict the ability of
FNBGC 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 Banks 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 Florida Department, 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 Florida Department or a federal regulatory agency.
Insurance of Accounts and Other Assessments
The Banks' 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 Banks and make their own periodic
examinations of the Banks. 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.
In 1996, the Deposit Insurance Funds Act of 1996 ("DIFA") was enacted.
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 accrued in the
third quarter of 1996. As a result, since early 1997, both BIF and
SAIF deposits have been assessed at the same rate of 0 to 27 basis
points depending on risk classification.
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.
Transactions With Affiliates
The authority of the Banks 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 Banks, are prohibited from making extensions of credit to any
affiliate that engages in an activity not permissible under the
regulations of the Federal Reserve for a bank holding company.
Pursuant to Sections 23A and 23B of the Federal Reserve Act ("FRA"),
member banks and national 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 Banks, a bank or savings association subsidiary of the Banks, any
persons who own, control or vote more than 25% of any class of stock
of the Banks 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 Banks or the
Company and any company sponsored and advised on a contractual basis
by the Banks or any subsidiary or affiliate of the Banks. Such
transactions between the Banks and their 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 Banks' 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 Banks to affiliates, 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 Banks
generally may not purchase securities issued or underwritten by affiliates.
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
Banks are permitted to extend credit to executive officers.
Community Reinvestment Act
The Community Reinvestment Act of 1977 ("CRA") and the regulations
issued thereunder are intended to encourage banks to help meet the
credit needs of their service area, including low and moderate income
neighborhoods, consistent with the safe and sound operations of the
banks. These regulations also provide for regulatory assessment of a
bank's record in meeting the needs of its service area when
considering applications to establish branches, merger applications
and applications to acquire the assets and assume the liabilities of
another bank. Federal banking agencies are required to make public a
rating of a bank's performance under the CRA. In the case of a
financial holding company, the CRA performance record of the banks
involved in the transaction are reviewed in connection with the filing
of an application to acquire ownership or control of shares or assets
of a bank or to merge with any other financial holding company. An
unsatisfactory record can substantially delay or block the transaction.
Capital Regulations
The Federal Reserve has adopted risk-based, capital adequacy
guidelines for financial holding companies and their subsidiary state-
chartered banks that are members of the Federal Reserve System. The
OCC has also adopted risk-based, capital adequacy guidelines for
national banks. The risk-based capital guidelines are designed to
make regulatory capital requirements more sensitive to differences in
risk profiles among banks and financial holding companies, to account
for off-balance sheet exposure, to minimize disincentives for holding
liquid assets and to achieve greater consistency in evaluating the
capital adequacy of major banks throughout the world. 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 financial 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 I
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 appropriate
regulator (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 financial 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 guideline. These regulations
generally require banks and financial holding companies to maintain a
minimum level of Tier I Capital to total assets less goodwill of 4%
(the "leverage ratio"). The Federal Reserve permits a bank to
maintain a minimum 3% leverage ratio if the bank achieves a 1 rating
under the CAMELS rating system in its most recent examination, as long
as the bank is not experiencing or anticipating significant growth.
The CAMELS rating is a non-public system used by bank regulators to
rate the strength and weaknesses of financial institutions. The
CAMELS rating is comprised of six categories: capital, asset quality,
management, earnings, liquidity, and interest rate sensitivity.
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 bank regulators also continue 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 I 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. Financial 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 bank regulators possesses the discretionary
authority to require higher ratios.
The Company and the Banks currently exceed the requirements contained
in the applicable regulations, policies and directives pertaining to
capital adequacy, and management of the Company and the Banks is
unaware of any material 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 now provides that adequately
capitalized and managed financial holding companies are permitted to
acquire banks in any state. State laws prohibiting interstate banking
or discriminating against out-of-state banks are preempted. 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 adequately capitalized
and managed banks are 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 responded to the enactment of the Interstate Banking Act by
enacting the Florida Interstate Branching Act (the "Florida Branching
Act"). The purpose of the Florida Branching Act was to permit
interstate branching through merger transactions under the Interstate
Banking Act. Under the Florida Branching Act, with the prior approval
of the Florida Department, 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.
Consumer Laws and Regulations
The Banks are also subject to certain consumer laws and regulations
that are designed to protect consumers in transactions with banks.
While the list set forth below is not exhaustive, these laws and
regulations include the Truth in Lending Act, the Truth in Savings
Act, the Electronic Funds Transfer Act, the Expedited Funds
Availability Act, the Equal Credit Opportunity Act, and the Fair
Housing Act. These laws and regulations mandate certain disclosure
requirements and regulate the manner in which financial institutions
must deal with customers when taking deposits or making loans to such
customers. The Banks must comply with the applicable provisions of
these consumer protection laws and regulations as part of their
ongoing customer relations.
Future Legislative Developments
Various legislation, including proposals to overhaul the bank
regulatory system, expand the powers of banking institutions and
financial holding companies and limit the investments that a
depository institution may make with insured funds, is from time to
time introduced in Congress. Such legislation may change banking
statutes and the environment in which the Company and its banking
subsidiaries operate in substantial and unpredictable ways. We cannot
determine the ultimate effect that potential legislation, if enacted,
or implementing regulations with respect thereto, would have upon our
financial condition or results of operations or that of our subsidiaries.
Expanding Enforcement Authority
One of the major additional burdens imposed on the banking industry by
the FDICIA is the increased ability of banking regulators to monitor
the activities of banks and their holding companies. In addition, the
Federal Reserve and FDIC are possessed of extensive authority to
police unsafe or unsound practices and violations of applicable laws
and regulations by depository institutions and their holding
companies. For example, the FDIC may terminate the deposit insurance
of any institution which it determines has engaged in an unsafe or
unsound practice. The agencies can also assess civil money penalties,
issue cease and desist or removal orders, seek injunctions, and
publicly disclose such actions. FDICIA, the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 and other laws have
expanded the agencies' authority in recent years, and the agencies
have not yet fully tested the limits of their powers.
Effect of Governmental Monetary Policies
The commercial banking business in which the Banks engage is affected
not only by general economic conditions, but also by the monetary
policies of the Federal Reserve. 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 Federal Reserve.
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 Federal Reserve 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
Federal Reserve 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 Banks cannot be predicted.
Item 2. Properties
Capital City Bank Group, Inc., is headquartered in Tallahassee,
Florida. The Company's executive office is 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 L.L.P. in which several directors
and officers have an interest. Lease payments during 2000 totaled
approximately $81,000.
As of March 9, 2001, the Company had fifty-six banking locations. Of
the fifty-six locations, the Company leases either the land or
buildings (or both) at nine locations and owns the land and buildings
at the remaining forty-seven.
Item 3. Legal Proceedings
The Company is a party to lawsuits and claims arising out of the normal
course of business. In management's opinion, thare are no known pending
claims or litigation, the outcome of which would have a material effect
on the consolidated results of operations, financial position or cash
flows of the Company.
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 Shareowner 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 1,599 shareowners of record at March 9, 2001.
2000 1999
------------------------------ --------------------------------
Fourth Third Second First Fourth Third Second First
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. (1)
------------------------------ --------------------------------
Common stock price:
High $26.75 $20.50 $20.50 $23.00 $25.00 $30.00 $25.00 $27.63
Low 18.88 18.75 18.00 15.00 20.19 21.00 20.25 22.00
Close 24.81 19.56 19.50 19.63 21.50 22.75 25.00 23.31
Cash dividends
declared per share .1475 .1325 .1325 .1325 .1325 .12 .12 .18
(1) Dividend amount includes a one-time distribution paid to Grady
Holding Company shareowners of approximately $563,000.
Future payment of dividends will be subject to determination and
declaration by the Board of Directors.
Item 6. Selected Financial & Other Data
(Dollars in Thousands, Except Per Share Data)(1)
For the Years Ended December 31,
----------------------------------------------------------
2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------
Interest Income $ 109,334 $ 99,685 $ 89,010 $ 84,981 $ 74,406
Net Interest Income 63,100 58,438 53,762 52,293 45,846
Provision for Loan Losses 3,120 2,440 2,439 2,328 1,863
Net Income 18,153 15,252 15,294 14,401 13,219
Per Common Share:
Basic Net Income $ 1.78 $ 1.50 $ 1.51 $ 1.44 $ 1.33
Diluted Net Income 1.78 1.50 1.50 1.43 1.33
Cash Dividends Declared(2) .545 .5525 .45 .37 .34
Book Value 14.56 12.96 12.69 11.54 10.39
Based on Net Income:
Return on Average Assets 1.24% 1.06% 1.30% 1.30% 1.31%
Return on Average Equity 12.99 11.64 12.37 13.10 13.52
Dividend Pay-out Ratio(2) 30.62 32.86 28.20 26.10 25.45
Averages for the Year:
Loans, Net of Unearned
Interest $1,002,122 $ 884,323 $ 824,197 $ 770,416 $ 631,437
Earning Assets 1,315,024 1,291,262 1,065,677 1,000,466 908,137
Assets 1,463,612 1,444,069 1,180,785 1,108,088 1,012,480
Deposits 1,207,103 1,237,405 985,119 924,891 856,540
Long-Term Debt 13,070 17,274 18,041 19,412 10,895
Shareowners' Equity 139,738 131,058 123,647 109,948 97,738
Year-End Balances:
Loans, Net of Unearned
Interest $1,051,832 $ 928,486 $ 844,217 $ 775,451 $ 745,126
Earning Assets 1,369,294 1,263,296 1,288,439 998,401 996,827
Assets 1,527,460 1,430,520 1,443,675 1,116,651 1,123,221
Deposits 1,268,367 1,202,658 1,253,553 922,841 952,744
Long-Term Debt 11,707 14,258 18,746 18,106 18,847
Shareowners' Equity 147,607 132,216 128,862 115,807 103,009
Equity to Assets Ratio 9.66% 9.24% 8.93% 10.37% 9.17%
Other Data:
Basic Average Shares
Outstanding 10,186,199 10,174,945 10,146,393 10,031,116 9,908,762
Diluted Average Shares
Outstanding 10,214,842 10,196,233 10,167,630 10,063,852 9,948,076
Shareowners of Record(3) 1,599 1,362 1,334 1,234 1,045
Banking Locations(3) 56 48 46 39 38
Full-Time Equivalent Associates(3) 791 678 677 637 617
(1) All share and per share data have been restated to reflect the
pooling-of-interests of Grady Holding Company and its subsidiaries and
adjusted to reflect the 3-for-2 stock split effective June 1, 1998, and
the 2-for-1 stock split effective April 1, 1997.
(2) Dividend amount includes a one-time distribution to Grady Holding
Company shareowners of approximately $563,000, paid during the first
quarter of 1999.
(3) As of March 9th of the following year.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL REVIEW
The following analysis reviews important factors affecting the
financial condition and results of operations of Capital City Bank
Group, Inc., for the periods shown below. The Company has made, and may
continue to make, various forward-looking statements with respect to
financial and business matters that involve numerous assumptions, risks
and uncertainties. The following is a list of factors, among others,
that could cause actual results to differ materially from the forward-
looking statements: general and local economic conditions, competition
for the Company's customers from other banking and financial
institutions, government legislation and regulation, changes in
interest rates, the impact of rapid growth, significant changes in the
loan portfolio composition, and other risks described in the Company's
filings with the Securities and Exchange Commission, all of which are
difficult to predict and many of which are beyond the control of the
Company.
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 2000 compares with prior years. Throughout
this section, Capital City Bank Group, Inc., and its subsidiaries,
collectively, are referred to as "CCBG" or the "Company". Capital City
Bank is referred to as "CCB" and First National Bank of Grady County is
referred to "FNBGC", or collectively as the "Banks".
The year-to-date averages used in this report are based on daily
balances for each respective year. 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, quarterly 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 restated to reflect
a three-for-two stock split effective June 1, 1998 and the acquisition
of Grady Holding Company, which was accounted for under the pooling-of-
interests method of accounting.
During the first quarter of 2001, the Company plans to complete its
acquisition of First Bankshares of West Point, Inc., and its subsidiary
First National Bank of West Point. First National Bank of West Point
is a $155 million financial institution with offices located in West
Point, Georgia, and two offices in the Greater Valley area of Alabama.
First Bankshares of West Point, Inc., will merge with CCBG, and First
National Bank of West Point will merge with CCB. The Company will
issue 3.6419 shares and $17.7543 in cash for each of the 192,481 shares
of First Bankshares of West Point, Inc. The transaction will be
accounted for as a purchase and result in approximately $5.0 million of
intangibles, primarily goodwill. These intangible assets will be
amortized over fifteen years.
During the first quarter of 2001, the Company plans to complete its
purchase and assumption agreement with First Union National Bank
("First Union") to acquire six of First Union's offices which includes
real estate, loans and deposits. The transaction will create
approximately $11.5 million in intangible assets which will be
amortized over 10 years. The Company agreed to purchase approximately
$26 million in loans and assume deposits of approximately $109 million.
On May 7, 1999, the Company completed its acquisition of Grady Holding
Company and its subsidiary, First National Bank of Grady County in
Cairo, Georgia. FNBGC is a $119 million asset institution with offices
in Cairo and Whigham, Georgia. The Company issued 21.50 shares for each
of the 60,910 shares of FNBGC. The consolidated financial statements
of the Company give effect to the merger which has been accounted for
as a pooling-of-interests. Accordingly, financial statements for the
prior periods have been restated to reflect the results of operations
of these entities on a combined basis from the earliest period presented.
On December 4, 1998, the Company completed its first purchase and
assumption transaction with First Union and acquired eight of First
Union's offices which included deposits. The Company paid a premium of
$16.9 million, and assumed approximately $219 million in deposits and
acquired certain real estate. The 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 offices which included loans and deposits. The Company paid a
deposit premium of $3.6 million, assumed $55 million in deposits and
purchased loans equal to $44 million. Four of the five offices were
merged into existing offices of CCB. The deposit premium is being
amortized over its expected useful life.
The Company is headquartered in Tallahassee and, as of December 31,2000,
had forty-seven offices covering seventeen counties in Florida and one
county in Georgia.
EARNINGS ANALYSIS
Earnings, including the effects of special charges and intangible
amortization, were $18.2 million, or $1.78 per diluted share. This
compares to $15.3 million, or $1.50 per diluted share in 1999 and 1998,
respectively. During 2000, special charges, net of taxes, totaled
$482,000, or $.04 per diluted share, compared to $1.2 million, or $.12
per diluted share in 1999 and $75,000, or $.01 per diluted share in
1998. Amortization of intangible assets, net of taxes, in 2000 and
1999 totaled $1.9 million, or $.19 per diluted share, compared to
$928,000, or $.09 per diluted share in 1998.
In 2000, excluding special charges, earnings increased $2.0 million, or
12.0%, due primarily to revenue growth. Operating revenues (defined as
taxable equivalent net interest income plus noninterest income) grew
$4.7 million, or 5.4%, over 1999. 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)(1)
For the Years Ended December 31,
-----------------------------------
2000 1999 1998
-----------------------------------
Interest Income $109,334 $ 99,685 $89,010
Taxable Equivalent Adjustments 1,577 1,761 1,402
-------- -------- -------
Total Interest Income (FTE) 110,911 101,446 90,412
Interest Expense 46,234 41,247 35,248
-------- -------- -------
Net Interest Income (FTE) 64,677 60,199 55,164
Provision for Loan Losses 3,120 2,440 2,439
Taxable Equivalent Adjustments 1,577 1,761 1,402
-------- -------- -------
Net Interest Income After Provision
for Loan Losses 59,980 55,998 51,323
Noninterest Income 26,769 26,561 24,384
Noninterest Expense 59,147 59,828 52,244
-------- -------- -------
Income Before Income Taxes 27,602 22,731 23,463
Income Taxes 9,449 7,479 8,169
-------- -------- -------
Net Income $ 18,153 $ 15,252 $15,294
======== ======== =======
Basic Net Income Per Share $ 1.78 $ 1.50 $ 1.51
======== ======== =======
Diluted Net Income Per Share $ 1.78 $ 1.50 $ 1.50
======== ======== =======
(1) All share and per share data have been restated to reflect the
pooling-of-interests of Grady Holding Company and its subsidiaries and
adjusted to reflect the 3-for-2 stock split effective June 1, 1998.
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 2000, taxable equivalent net interest income increased $4.5 million,
or 7.4%. This follows an increase of $5.0 million, or 9.1%, in 1999,
and $1.3 million, or 2.4%, in 1998. The increase in taxable equivalent
net interest income during 2000 is due to the change in mix of earning
assets attributable to the growth of the loan portfolio and increasing
yields. The favorable impact of asset growth and yield enhancement was
partially offset by increasing rates in interest bearing liabilities.
Table 2
AVERAGE BALANCES AND INTEREST RATES
(Taxable Equivalent Basis - Dollars in Thousands)
2000 1999 1998
---------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
---------------------------------------------------------------------------------------------
Assets:
Loans, Net of Unearned Interest(1)(2) $1,002,122 $ 92,486 9.23% $ 884,323 $ 78,646 8.89% $ 824,197 $76,104 9.23%
Taxable Investment Securities 199,234 11,701 5.87 232,085 13,229 5.70 107,484 6,417 5.97
Tax-Exempt Investment Securities(2) 92,440 5,403 5.84 101,994 6,013 5.89 67,297 4,315 6.41
Funds Sold 21,228 1,321 6.22 72,860 3,558 4.88 66,699 3,576 5.36
---------- -------- ---- ---------- -------- ---- ---------- ------- ----
Total Earning Assets 1,315,024 110,911 8.43 1,291,262 101,446 7.86 1,065,677 90,412 8.48
Cash & Due From Banks 62,202 67,410 53,293
Allowance For Loan Losses (10,468) (10,132) (10,056)
Other Assets 96,854 95,529 71,871
---------- ---------- ----------
TOTAL ASSETS $1,463,612 $1,444,069 $1,180,785
========== ========== ==========
Liabilities:
NOW Accounts $ 174,853 $ 4,444 2.54% $ 155,584 $ 3,134 2.01% $ 119,134 $ 2,223 1.87%
Money Market Accounts 160,258 6,673 4.16 155,594 5,766 3.71 86,244 2,562 2.97
Savings Accounts 106,072 2,446 2.31 115,789 2,453 2.12 101,007 2,243 2.22
Other Time Deposits 496,699 26,896 5.42 546,433 26,962 4.93 469,087 25,091 5.35
---------- -------- ---- ---------- -------- ---- ---------- ------- ----
Total Interest Bearing Deposits 937,882 40,459 4.31 973,400 38,315 3.94 775,472 32,119 4.14
Short-Term Borrowings 86,119 4,968 5.77 42,317 1,816 4.29 38,987 1,904 4.88
Long-Term Debt 13,070 807 6.17 17,274 1,116 6.46 18,041 1,225 6.79
---------- -------- ---- ---------- -------- ---- ---------- ------- ----
Total Interest Bearing Liabilities 1,037,071 46,234 4.46 1,032,991 41,247 3.99 832,500 35,248 4.23
-------- ---- -------- ---- ------- ----
Noninterest Bearing Deposits 269,221 264,005 209,647
Other Liabilities 17,582 16,015 14,991
---------- ---------- ----------
TOTAL LIABILITIES 1,323,874 1,313,011 1,057,138
Shareowners' Equity:
Common Stock 102 102 102
Additional Paid-In Capital 9,188 8,882 8,040
Retained Earnings 130,448 122,074 115,505
---------- ---------- ----------
TOTAL SHAREOWNERS' EQUITY 139,738 131,058 123,647
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREOWNERS' EQUITY $1,463,612 $1,444,069 $1,180,785
========== ========== ==========
Interest Rate Spread 3.97% 3.87% 4.25%
==== ==== ====
Net Interest Income $ 64,677 $ 60,199 $55,164
======== ======== =======
Net Interest Margin(3) 4.91% 4.67% 5.18%
==== ==== ====
(1) Average balances include nonaccrual loans. Interest income includes fees on
loans of approximately $4.0 million, $3.5 million and $3.2 million in 2000,
1999, and 1998, respectively.
(2) Interest income includes the effects of taxable equivalent adjustments using
a 35% tax rate to adjust interest on tax-exempt loans and securities to a
taxable equivalent basis.
(3) Taxable equivalent net interest income divided by average earning assets.
Table 3
RATE/VOLUME ANALYSIS(1)
(Taxable Equivalent Basis - Dollars in Thousands)
2000 Changes from 1999 1999 Changes from 1998
-----------------------------------------------------------------------
Due To Due To
Average Average
------------------- --------------------
Total Volume Rate Total Volume Rate
- ---------------------------------------------------------------------------------------------------------------
EARNING ASSETS:
Loans, Net of Unearned Interest(2) $13,840 $10,472 $ 3,368 $ 2,542 $ 5,550 $(3,008)
Investment Securities:
Taxable (1,528) (1,872) 344 6,812 7,439 (627)
Tax-Exempt (610) (562) (48) 1,698 2,224 (526)
Funds Sold and Interest
Bearing Deposits (2,237) (2,520) 283 (18) 330 (348)
------- ------- ------- ------- ------- -------
Total 9,465 5,518 3,947 11,034 15,543 (4,509)
------- ------- ------- ------- ------- -------
Interest Bearing Liabilities:
NOW Accounts 1,310 387 923 911 682 229
Money Market Accounts 907 173 734 3,204 2,060 1,144
Savings Accounts (7) (206) 199 210 328 (118)
Other Time Deposits (66) (2,452) 2,386 1,871 4,138 (2,267)
Short-Term Borrowings 3,152 1,881 1,271 (88) 163 (251)
Long-Term Debt (309) (272) (37) (109) (52) (57)
------- ------- ------- ------- ------- -------
Total 4,987 (489) 5,476 5,999 7,319 (1,320)
------- ------- ------- ------- ------- -------
Changes in Net Interest Income $ 4,478 $ 6,007 $(1,529) $ 5,035 $ 8,224 $(3,189)
======= ======= ======= ======= ======= =======
(1) This table shows the change in tax equivalent 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 to adjust interest on tax-exempt loans and securities to a
taxable equivalent basis.
For the year 2000, taxable equivalent interest income increased $9.5
million, or 9.3%, over 1999, compared to an increase of $11.0 million,
or 12.2%, in 1999 over 1998. The Company's taxable equivalent yield
on average earning assets of 8.43% represents a 57 basis point
increase from 1999, compared to a 62 basis point decrease in 1999 over
1998. During 2000, interest income was positively impacted by the
shift in earning asset mix and higher yields. The loan portfolio,
which is the largest and highest yielding component of average earning
assets, increased from 71.4% in the fourth quarter of 1999, to 77.5%
in the comparable quarter of 2000.
Interest expense increased $5.0 million, or 12.1%, over 1999, compared
to an increase of $6.0 million, or 17.0%, in 1999 over 1998. The
higher level of interest expense in 2000 is attributable to increased
competition and the general rise in interest rates. The average rate
paid on interest-bearing liabilities was 4.46% in 2000, compared to
3.99% in 1999 and 4.23% in 1998. The increase in rate on interest
bearing liabilities was partially offset by a shift in mix and a
decline in average deposits. As a percent of average deposits,
certificates of deposit (a higher cost deposit product) declined to
41.1% in 2000, from 44.1% in 1999 and 47.6% in 1998.
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 10 basis points in 2000 and declined 38
basis points in 1999. The increase in 2000 is attributable to the
change in earning asset mix and higher interest rates as discussed
above. The decrease in 1999 is attributable to the change in earning
asset mix reflecting the assumption of $219 million in deposits from
First Union.
The Company's net interest margin (defined as taxable equivalent
interest income less interest expense divided by average earning
assets) was 4.91% in 2000, compared to 4.67% in 1999 and 5.18% in
1998. In 2000, the shift in the earning asset mix, partially offset
by higher interest rates, resulted in a 24 basis point increase in the
margin.
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 $3.1 million in 2000, compared to
$2.4 million in 1999 and 1998. The increase in the 2000 provision
primarily reflects the Company's loan growth. In 1999, the provision
approximated total net charge-offs. The Company's credit quality
measures improved with a nonperforming assets ratio of .37% compared
to .42% at year-end 1999, and a net charge-off ratio of .25% versus
.26% in 1999.
At December 31, 2000, the allowance for loan losses totaled $10.6
million compared to $9.9 million in 1999. At year-end 2000, the
allowance represented 1.00% of total loans and 360% of nonperforming
loans. Management considers the allowance to be adequate based on the
current level of nonperforming loans and the estimate of losses
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:
2000 1999 1998
------------------------------
Provision for Loan Losses as a
Multiple of Net Charge-offs 1.3x 1.0x 1.1x
Pre-tax Income Plus Provision
for Loan Losses as a Multiple
of Net Charge-offs 12.4x 10.8x 11.4x
------------------------------
Noninterest Income
In 2000, noninterest income increased $208,000, or 0.8%, and
represented 29.3% of taxable equivalent operating revenue, compared to
$2.2 million, or 9.6%, and 29.1% in 1999. The increase in the level
of noninterest income is attributable to fees for trust services and
other income. Partially offsetting this increase were declines in
service charges on deposit accounts and data processing fees. The
increase in 1999 was primarily a result of higher service charges on
deposit accounts, trust revenues and other income. Factors affecting
noninterest income are discussed below.
Service charges on deposit accounts decreased $593,000, or 5.9%, in
2000, compared to an increase of $1.4 million, or 16.8%, in 1999.
Service charge revenues in any one year are dependent on the number of
accounts, primarily transaction accounts, the level of activity
subject to service charges and the collection rate. The decrease in
2000 is primarily attributable to higher compensating balances and a
decrease in the number of chargeable accounts. The increase in 1999
reflects a fee increase implemented in November 1998 and an increase
in the number of accounts due to the First Union offices acquired in
December 1998.
Data processing revenues decreased $336,000, or 11.7%, in 2000 versus
a decrease of $662,000, or 18.8%, in 1999. The data processing center
provides computer services to both financial and non-financial clients
in North Florida and South Georgia. The decrease was primarily a
result of a decline in revenues for non-financial clients. The
Company currently processes for six financial clients, a decline of
two from the third quarter. In 2000, processing revenues for non-
financial entities represented approximately 23% of the total
processing revenues, down from 33% in the prior year. In 1999, the
decrease reflects lower processing revenues with government agencies.
In 2000, trust fees increased $208,000, or 9.3%, compared to $466,000,
or 26.5% in 1999. Increases in both years were attributable to growth
in assets under management. At year-end 2000, assets under management
totaled $328 million, reflecting growth of $20.5 million, or 6.7%.
For the comparable period in 1999, assets under management totaled
$307.5 million, reflecting growth of $46.3 million, or 17.7%.
Other noninterest income increased $915,000, or 8.0%, in 2000 versus
an increase of $1.0 million, or 12.0% in 1999. The increase in 2000
was attributable to credit card merchant fees, credit card interchange
fees, brokerage revenues and check printing income. Partially
offsetting this increase was a decline in gains recognized on the sale
of real estate loans. The increase in other noninterest income in
1999 was attributable to ATM fees, brokerage revenues, receivable
financing fees, credit card interchange fees and gains on the sale of
bank assets.
Noninterest income as a percent of average assets increased to 1.83%
in 2000, compared to 1.71% in 1999 and 1.91% in 1998.
Noninterest Expense
Noninterest expense for 2000 was $59.1 million, a decrease of
$681,000, or 1.1%, over 1999, compared with an increase of $7.6
million, or 15.0%, in 1999 over 1998. Factors impacting the Company's
noninterest expense during 2000 and 1999 are discussed below.
The Company's aggregate compensation expense in 2000 totaled $30.0
million, an increase of $1.0 million, or 3.4%, over 1999. The
increase was primarily in salaries due to raises, higher commissions
and incentives. In 1999, total compensation increased $2.4 million,
or 8.9%, over 1998. The increase was primarily in salaries due to the
addition of eight offices and raises.
Occupancy expense (including furniture, fixtures & equipment)
increased by $304,000, or 3.0%, in 2000, compared to $1.3 million, or
14.8%, in 1999. The increase was attributable to higher depreciation,
utilities and software licenses, and was partially offset by a decline
in maintenance and repairs. The increase in 1999 was due to the
addition of eight offices acquired from First Union resulting in
higher costs in all occupancy categories. The most significant
increases occurred in premises rental, utilities, and maintenance costs.
Merger-related expenses totaled $761,000 and $1.4 million, in 2000 and
1999, respectively. The costs for both years were attributable to the
acquisition of Grady Holding Company and its subsidiaries.
Other noninterest expense decreased $1.4 million, or 7.1% in 2000 and
increased $2.6 million, or 17.0% in 1999. The decrease in 2000 was
attributable to: (1) a decrease in intangible taxes of $511,000
resulting from the elimination of this tax for banks by the State of
Florida; (2) decline in other losses of $326,000; (3) decline in
telephone costs of $293,000 resulting from the completion of the wide-
area network; and (4) elimination of YEAR 2000 costs. The increase in
1999 was attributable to: (1) an increase in amortization expense of
approximately $1.6 million due to the acquisition of First Union
offices; (2) an increase in telephone expense of $282,000, as a result
of implementing a wide-area network; (3) an increase in postage costs
of $383,000 due to postal rate increase and higher volume with the
addition of the new offices; and (4) YEAR 2000 expenses.
The net noninterest expense ratio (defined as noninterest income minus
noninterest expense, net of intangible amortization and special
charges, as a percent of average assets) was 1.97% in 2000, compared
to 2.01% in 1999 and 2.25% in 1998. The Company's efficiency ratio
(expressed as noninterest expense, net of intangible amortization and
special charges, as a percent of taxable equivalent operating
revenues) was 60.7%, 63.7%, and 64.0% in 2000, 1999, and 1998,
respectively.
Income Taxes
The consolidated provision for federal and state income taxes was $9.4
million in 2000, compared to $7.5 million in 1999 and $8.2 million in
1998. The increase in the 2000 tax provision from 1999 is primarily
attributable to a higher operating profit and a decline of tax-exempt
income.
The effective tax rate was 34.2% in 2000, 32.9% in 1999, and 34.8% in
1998. These rates differ from the statutory tax rates due primarily
to tax-exempt income. The increase in the effective tax rate for 2000
is primarily attributable to the increase in earnings and the decline
of tax-exempt income relative to pre-tax income. Tax-exempt income
(net of the adjustment for disallowed interest) as a percent of pre-
tax income was 19.8% in 2000, 26.5% in 1999, and 18.0% in 1998.
FINANCIAL CONDITION
Average assets increased $19.5 million, or 1.4%, from $1.44 billion in
1999 to $1.46 billion in 2000. Average earning assets increased
slightly to $1.32 billion in 2000, a $23.8 million, or 1.8%, increase
over 1999. Average loans increased $118.0 million, or 13.3%,
partially offset by a decline in average securities and funds sold of
$42.4 million, or 12.7%, and $51.6 million, or 70.9%, respectively.
Loan growth in 2000 was funded through liquidation of funds sold, and
the maturity of investment securities and short-term borrowings.
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 continued to improve during 2000. Loan growth was
strong throughout the year with the residential portfolio representing
a significant portion of the growth. The Company continued to enhance
the line of products and services offered in the markets served. Price
and product competition remain strong. Other areas reflecting strong
demand were home equity, consumer indirect automobile and commercial
real estate.
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 identify
opportunities to increase loans outstanding and enhance the
portfolio's overall contribution to earnings, it can do so only by
adhering to sound lending principles applied in a prudent and
consistent manner.
Table 4
SOURCES OF EARNING ASSET GROWTH
(Average Balances - Dollars in Thousands)
1999 to Percentage Components
2000 of Total of Average Earning Assets
Change Change 2000 1999 1998
- -------------------------------------------------------------------------------------
Loans:
Commercial, Financial
and Agricultural $ 14,457 60.9% 8.2% 7.2% 8.0%
Real Estate - Construction 12,719 53.5 5.2 4.3 4.5
Real Estate - Mortgage 78,765 331.5 49.3 44.2 49.9
Consumer 11,858 49.9 13.5 12.8 14.9
-------- ----- ----- ----- -----
Total Loans 117,799 495.8 76.2 68.5 77.3
-------- ----- ----- ----- -----
Securities:
Taxable (32,851) (138.3) 15.2 18.0 10.1
Tax-Exempt (9,554) (40.2) 7.0 7.9 6.3
-------- ----- ----- ----- -----
Total Securities (42,405) (178.5) 22.2 25.9 16.4
-------- ----- ----- ----- -----
Funds Sold (51,632) (217.3) 1.6 5.6 6.3
-------- ----- ----- ----- -----
Total Earning Assets $ 23,762 100.0% 100.0% 100.0% 100.0%
======== ===== ===== ===== =====
The Company's average loan-to-deposit ratio increased from 71.5% in
1999, to 83.0% in 2000. This compares to an average loan-to-deposit
ratio in 1998 of 83.7%. The higher average loan-to-deposit ratio
reflects the increase in loan growth and a decline in deposits,
primarily certificates of deposits. The Company sold loans of
approximately $23 million during the fourth quarter of 2000. The sale
consisted of both fixed and variable rate residential loans.
Real estate loans, combined, represented 72.2% of total loans in 2000,
versus 71.1% in 1999. 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, 2000, 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
fixed interest rates have decreased from 33.0% in 1999, to 30.5% in 2000.
Allowance for Loan Losses
Management attempts to maintain the allowance for loan losses at a
level sufficient to provide for estimated 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,
------------------------------------------------------
2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------
Commercial, Financial and
Agricultural $ 108,340 $ 98,894 $ 91,246 $ 82,641 $ 82,724
Real Estate - Construction 84,133 62,166 51,790 51,098 46,415
Real Estate - Mortgage 231,099 214,036 542,044 492,778 472,052
Real Estate - Residential(1) 444,489 383,536 - - -
Consumer 183,771 169,854 159,137 148,934 143,935
---------- -------- -------- -------- --------
Total Loans, Net of
Unearned Interest $1,051,832 $928,486 $844,217 $775,451 $745,126
========== ======== ======== ======== ========
(1) Real Estate - Residential loan information included in Real Estate - Mortgage
category for 1998, 1997 and 1996.
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 $ 54,548 $ 31,777 $ 22,015 $ 108,340
Real Estate 123,527 67,139 569,055 759,721
Consumer 49,639 123,740 10,392 183,771
-------- -------- -------- ----------
Total $227,714 $222,656 $601,462 $1,051,832
======== ======== ======== ==========
Loans with Fixed Rates $ 71,440 $172,065 $ 76,902 $ 320,407
Loans with Floating or
Adjustable Rates 156,274 50,591 524,560 731,425
-------- -------- -------- ----------
Total $227,714 $222,656 $601,462 $1,051,832
======== ======== ======== ==========
The allowance for loan losses at December 31, 2000 of $10.6 million
compares to $9.9 million at year-end 1999. The allowance as a percent
of total loans was 1.00% in 2000, versus 1.07% in 1999. 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, 2000 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,
-----------------------------------------------
2000 1999 1998 1997 1996
- -----------------------------------------------------------------------------------
Balance at Beginning of Year $ 9,929 $9,827 $9,662 $9,450 $7,522
Acquired Reserves - - - - 1,769
Charge-Offs:
Commercial, Financial
and Agricultural 626 480 127 568 594
Real Estate - Construction 7 - 15 31 -
Real Estate - Mortgage - 354 1,011 485 119
Real Estate - Residential(1) 168 251 - - -
Consumer 2,387 2,113 2,004 1,978 1,691
------- ------ ------ ------ ------
Total Charge-Offs 3,188 3,198 3,157 3,062 2,404
------- ------ ------ ------ ------
Recoveries:
Commercial, Financial
and Agricultural 52 142 72 378 235
Real Estate - Construction 11 - 142 - 3
Real Estate - Mortgage 73 84 176 83 -
Real Estate - Residential(1) 54 11 - - -
Consumer 513 623 493 485 462
------- ------ ------ ------ ------
Total Recoveries 703 860 883 946 700
------- ------ ------ ------ ------
Net Charge-Offs 2,485 2,338 2,274 2,116 1,704
------- ------ ------ ------ ------
Provision for Loan Losses 3,120 2,440 2,439 2,328 1,863
------- ------ ------ ------ ------
Balance at End of Year $10,564 $9,929 $9,827 $9,662 $9,450
======= ====== ====== ====== ======
Ratio of Net Charge-Offs
to Average Loans Outstanding .25% .26% .28% .28% .27%
======= ====== ====== ====== ======
Allowance for Loan Losses as a
Percent of Loans at End of Year 1.00% 1.07% 1.16% 1.25% 1.27%
======= ====== ====== ====== ======
Allowance for Loan Losses as a
Multiple of Net Charge-Offs 4.25x 4.25x 4.32x 4.57x 5.55x
======= ====== ====== ====== ======
(1) Real Estate - Residential charge-off and recovery information is included in
the Real Estate - Mortgage category for 1998, 1997 and 1996.
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 $100,000, or 1.7%, from a
level of $3.0 million at December 31, 1999, to $2.9 million at
December 31, 2000. During 2000, loans totaling approximately $4.5
million were added, while loans totaling $4.6 million were removed
from nonaccruing status. Of the $4.6 million removed, $785,000
consisted of principal reductions, $847,000 represented loans
transferred to other real estate, $2.8 million consisted of loans
brought current and returned to an accrual status and loans
refinanced, and $201,000 was charged off. Where appropriate,
management has allocated specific reserves to absorb anticipated
losses. The majority (75%) of the Company's charge-offs in 2000 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)
2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
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 $ 1,423 10.3% $1,873 10.7% $1,599 10.8% $ 795 10.7% $ 773 11.1%
Real Estate:
Construction 424 8.0 477 6.7 556 6.1 488 6.6 342 6.2
Mortgage 3,157 22.0 3,228 23.0 3,461 64.2 3,035 63.5 3,894 63.4
Residential(1) 922 42.3 573 41.3 - - - - - -
Consumer 3,423 17.4 3,327 18.3 3,110 18.9 2,869 19.2 2,749 19.3
Not Allocated 1,215 - 451 - 1,101 - 2,475 - 1,692 -
------- ----- ------ ----- ------ ----- ------ ----- ------ -----
Total $10,564 100.0% $9,929 100.0% $9,827 100.0% $9,662 100.0% $9,450 100.0%
(1) Real Estate - Residential allowance for loan losses information is included
in the Real Estate - Mortgage category for 1998, 1997 and 1996.
Table 9
RISK ELEMENT ASSETS
(Dollars in Thousands)
As of December 31,
------------------------------------------------
2000 1999 1998 1997 1996
Nonaccruing Loans $ 2,919 $ 2,965 $ 4,996 $ 1,403 $ 2,811
Restructured 19 26 195 224 262
Total Nonperforming Loans 2,938 2,991 5,191 1,627 3,073
Other Real Estate 971 934 1,468 1,244 1,489
Total Nonperforming Assets $ 3,909 $ 3,925 $ 6,659 $ 2,871 $ 4,562
Past Due 90 Days or More $ 1,102 $ 781 $ 1,124 $ 994 $ 638
Nonperforming Loans/Loans .28% .32% .61% .21% .41%
Nonperforming Assets/Loans
Plus Other Real Estate .37% .42% .79% .37% .61%
Nonperforming Assets/Capital(1) 2.47% 2.76% 4.80% 2.28% 4.06%
Reserve/Nonperforming Loans 359.57% 331.96% 189.31% 593.85% 307.52%
(1) For computation of this percentage, "capital" refers to
shareowners' 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 interest on nonaccruing loans had
been recognized on a fully accruing basis, interest income recorded
would have been $291,000 higher for the year ended December 31, 2000.
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 $971,000 at December 31, 2000, versus
$934,000 at December 31, 1999. 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
2000, the Company added properties totaling $904,000, and partially or
completely liquidated properties totaling $867,000, resulting in a net
decrease in other real estate of approximately $37,000. 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 $3.7 million at December 31, 2000.
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 Banks
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, 2000, approximately
72.2% of the portfolio consisted of real estate loans. Residential
properties comprise approximately 58.5% 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, 2000, 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 continues to focus its attention on
promptly identifying and providing for potential losses as they arise.
Investment Securities
In 2000, the Company's average investment portfolio decreased $42.4
million, or 12.7%, compared to a increase of $159.3 million, or 91.1%
in 1999. As a percentage of average earning assets, the investment
portfolio represented 22.2% in 2000, compared to 25.9% in 1999. The
decline in the portfolio was attributable to the maturities of
investment securities in all categories. The maturities were used to
fund the Company's loan growth throughout the year. The increase in
the 1999 portfolio was a result of the purchase of approximately $200
million in investment securities as a result of the assumption of
deposits from an acquisition.
In 2000, average taxable investments decreased $32.8 million, or
14.2%, while tax-exempt investments decreased $9.6 million, or 9.4%.
Although the Tax Reform Act of 1986 significantly reduced the tax
benefits associated with tax-exempt securities, management continues
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. As of December 31, 2000,
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, in
the accumulated other comprehensive loss component of shareowners'
equity. At December 31, 2000, shareowners' equity included a net
unrealized loss of $1.5 million, compared to a loss of $6.2 million at
December 31, 1999. 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, 2000 and
1999, was 2.63 and 3.38 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, 2000, was 5.83% versus 5.74% in 1999. 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
shareowners' equity at December 31, 2000.
Table 10 and Note 3 in the 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)
Moody's Rating Amortized Cost Percentage
- ----------------------------------------------
AAA $56,768 66.2%
AA-1 3,566 4.2
AA-2 3,269 3.8
AA-3 2,352 2.7
AA - -
A-1 1,935 2.3
A-2 1,132 1.3
A-3 195 .2
A 900 1.1
BAA 406 .5
Not Rated(1) 15,221 17.7
------- -----
Total $85,744 100.0%
(1) Of the securities not rated by Moody's, $12.8 million are rated
"A" or higher by S&P.
Table 10
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
As of December 31, 2000
-----------------------------------------------
Weighted
(Dollars in Thousands) Amortized Cost Market Value Average Yield(1)
- ----------------------------------------------------------------------------------
U. S. GOVERNMENTS
Due in 1 year or less $ 25,037 $ 24,994 5.52%
Due over 1 year thru 5 years 54 662 54,243 5.43
Due over 5 years thru 10 years - - -
Due over 10 years - - -
-------- -------- ----
TOTAL 79,699 79,237 5.46
STATE & POLITICAL SUBDIVISIONS
Due in 1 year or less 13,726 13,758 6.59
Due over 1 year thru 5 years 63,774 63,225 6.00
Due over 5 years thru 10 years 7,669 7,699 6.63
Due over 10 years 575 559 -
-------- -------- ----
TOTAL 85,744 85,241 6.16
MORTGAGE-BACKED SECURITIES(2)
Due in 1 year or less 341 341 6.27
Due over 1 year thru 5 years 71,203 70,235 5.79
Due over 5 years thru 10 years 2,197 2,173 6.64
Due over 10 years - - -
-------- -------- ----
TOTAL 73,741 72,749 5.82
OTHER SECURITIES
Due in 1 Year or less 1,516 1,513 5.76
Due over 1 year thru 5 years 32,481 32,055 5.58
Due over 5 years thru 10 years 625 608 5.03
Due over 10 years(3) 5,436 5,436 7.51
-------- -------- ----
TOTAL 40,058 39,612 5.82
-------- -------- ----
Total Investment Securities $279,242 $276,839 5.83%
======== ======== ====
(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.
(3) Federal Home Loan Bank Stock and Federal Reserve Bank Stock do not have
stated maturities.
AVERAGE MATURITY (In Years)
AS OF DECEMBER 31, 2000
U.S. Governments 1.76
State and Political Subdivisions 3.23
Mortgage-Backed Securities 3.28
Other Securities 1.89
----
TOTAL 2.63
====
Deposits and Funds Purchased
Average total deposits decreased from $1.24 billion in 1999, to $1.21
billion in 2000, representing an decrease of $30.3 million, or 2.5%,
compared with an increase of $252.3 million, or 25.6%, in 1999. In
2000, the decrease is primarily due to declining balances in
certificates of deposit and savings. The decline in certificates is
attributable to rising interest rates and an increase in competition.
Partially offsetting this decline was an increase in NOW, money market
and demand balances. The most significant increase occurred in NOW
balances primarily as a result of higher public funds. The Company
continues to experience a notable increase in competition for
deposits, in terms of both rate and product. In 1999, the annual
average increase is attributable to a full year impact of the
assumption of deposits from First Union and the continued success of
the CashPower Money Market Account.
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 short-term borrowings, which include federal funds purchased,
securities sold under agreements to repurchase and other borrowings,
increased $43.8 million, or 103.5%. The increase was primarily due to
borrowings from the Federal Home Loan Bank. See Note 8 in the Notes
to Consolidated Financial Statements for further information.
Table 11
SOURCES OF DEPOSIT GROWTH
(Average Balances - Dollars in Thousands)
1999 to Percentage Components of Total Deposits
2000 of Total ----------------------------
Change Change 2000 1999 1998
- --------------------------------------------------------------------------------
Noninterest Bearing
Deposits $ 5,216 17.2 % 22.3% 21.3% 21.3%
NOW Accounts 19,269 63.6 14.5 12.6 12.1
Money Market Accounts 4,664 15.4 13.3 12.6 8.8
Savings (9,717) (32.1) 8.8 9.4 10.2
Other Time Deposits (49,734) (164.1) 41.1 44.1 47.6
-------- ----- ----- ----- -----
Total Deposits $(30,302) (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, 2000
----------------------------------------
Time Certificates of Deposit Percent
- ------------------------------------------------------------------------
Three months or less $40,075 42.1%
Over three through six months 18,063 19.0
Over six through twelve months 24,319 25.6
Over twelve months 12,691 13.3
------- -----
Total $95,148 100.0%
======= =====
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, 2000, the Company had a $25.0 million credit
facility under which $23.7 million was currently available. The
facility offers the Company an unsecured, revolving line of credit for
a period of three years which matures in November 2004. 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 lenders' Cost of Funds rate ("COF"), plus or minus
increments thereof. The LIBOR or COF 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. In 2000, the Company
reduced the amount of debt to $1.3 million. The average interest rate
during 2000 was 6.71%.
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. As of
year-end 2000, the Company was in compliance with all of these
contractual and/or regulatory requirements.
At December 31, 2000, the Company had $10.4 million in long-term debt
outstanding to the Federal Home Loan Bank of Atlanta. The debt
consists of twelve loans. The interest rates are fixed and the
weighted average rate at December 31, 2000 was 6.07%. Required annual
principal reductions approximate $600,000, with the remaining balances
due at maturity ranging from 2001 to 2018. The debt was used to
match/fund selected lending activities and is secured by investment
securities and first mortgage residential real estate loans which are
included in the Company's loan portfolio. See Note 9 in the Notes to
Consolidated Financial Statements for additional information as to the
Company's long-term debt.
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, 2000, the Company had $296.3 million
in commitments to extend credit and $2.3 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 $8.0 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.
Shareowners' equity as of December 31, for each of the last three
years is presented below.
Shareowners' Equity
(Dollars in Thousands)
2000 1999 1998
- ------------------------------------------------------------------------
Common Stock $ 101 $ 102 $ 102
Additional Paid-in Capital 7,369 9,249 8,561
Retained Earnings 141,659 129,055 119,521
-------- -------- --------
Subtotal 149,129 138,406 128,184
-------- -------- --------
Accumulated Other Comprehensive
Income, Net of Tax (1,522) (6,190) 678
-------- -------- --------
Total Shareowners' Equity $147,607 $132,216 $128,862
======== ======== ========
The Company continues to maintain a strong capital position. The
ratio of shareowners' equity to total assets at year-end was 9.66%,
9.24% and 8.93%, in 2000, 1999 and 1998, respectively.
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. CCBG exceeded these capital
guidelines, with a total risk-based capital ratio of 12.86% and a Tier 1
ratio of 11.87%, compared to 12.27% and 11.23%, respectively, in 1999.
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, 2000, the
Company had a leverage ratio of 8.30% compared to 7.92% in 1999. 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 $.545 per share in 2000. During
the fourth quarter of 2000 the quarterly dividend was raised 11.3%
from $.1325 per share to $.1475 per share. The Company declared
dividends of $.5525 per share in 1999 and $.45 per share in 1998.
Included in the 1999 amount was approximately $563,000 of a one-time
distribution paid to Grady Holding Company shareowners. The dividend
payout ratio was 30.6%, 32.9%, and 28.2% for 2000, 1999 and 1998,
respectively. Dividends declared per share in 2000 represented a
10.7% increase over 1999, excluding the one-time distribution.
At December 31, 2000, the Company's common stock had a diluted book
value of $14.56 per share compared to $12.96 in 1999. Beginning in
1994, book value has been impacted by the net unrealized gains and
losses on investment securities available-for-sale. At December 31,
2000, the net unrealized loss was $1.5 million. At December 31, 1999,
the Company had a net unrealized loss of $6.2 million and thus the net
impact on equity for the year was an increase in book value of
approximately $4.7 million.
On March 30, 2000, the Company's Board of Directors authorized the
repurchase of up to 500,000 shares of its outstanding common stock.
The purchases will be made in the open market or in privately
negotiated transactions. The Company acquired 119,134 shares during
2000.
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 5,775
shares in 2000 under this plan.
The Company also offers stock purchase plans to its associates and
directors. In 2000, 31,398 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. In 2000 and
1999, shares for this plan were purchased in the open market, and thus
there were no newly issued shares 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 2000 and 1999, no contributions were made by the Company. The
participants may choose to invest their contributions into fifteen
investment funds, including 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
changes 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".
Accounting Pronouncements
In September 2000, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 140
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", a replacement of SFAS No. 125. The
statement revises the standards for accounting for securitizations and
other transfers of financial assets and collateral and requires
certain disclosures. The statement is effective for fiscal years
ending after December 15, 2000. The adoption of this standard did not
have a material impact on reported results of operations of the
Company.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" as amended. The statement
establishes accounting and reporting standards for derivative
instruments (including certain derivative instruments imbedded in
other contracts). The statement is effective for fiscal years
beginning after June 15, 2000. The adoption of this standard did not
have a material impact on reported results of operations of the
Company.
Item 7A. Quantitative and Qualitative 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.
CCBG 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 CCBG 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. CCBG'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 2000 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. The opposite is true in a
falling rate environment. 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)
Other Than Trading Portfolio
As of December 31, Fair
(Dollars in Thousands) 2001 2002 2003 2004 2005 Beyond Total Value
- ------------------------------------------------------------------------------------------------------------------------------
Loans
Fixed Rate $ 71,440 $ 41,328 $ 49,011 $ 41,550 $ 40,176 $ 76,902 $ 320,407 $ 325,620
Average Interest Rate 9.32% 10.05% 7.81% 8.72% 9.33% 8.11% 9.28%
Floating Rate(2) 386,394 59,238 54,324 47,831 76,501 107,137 731,425 743,325
Average Interest Rate 9.76% 8.46% 8.50% 8.13% 8.29% 7.57% 8.98%
Investment Securities(3)
Fixed Rate 66,009 48,930 30,310 20,338 30,003 73,451 269,041 269,041
Average Interest Rate 5.54% 5.25% 4.79% 4.19% 4.35% 5.82% 5.22%
Floating Rate - - - 7,295 - 503 7,798 7,798
Average Interest Rate - - - 6.84% - 6.05% 6.79%
Other Earning Assets
Fixed Rate - - - - - - - -
Average Interest Rate - - - - - - -
Floating Rate 40,623 - - - - - 40,623 40,623
Average Interest Rate 6.30% - - - - - 6.30%
Total Financial Assets $564,466 $149,496 $140,940 $109,719 $146,680 $257,993 $1,369,294 $1,386,407
Average Interest Rate 8.96% 7.85% 7.38% 7.62% 7.77% 7.23% 8.22%
Deposits(4)
Fixed Rate Deposits $445,397 $ 49,776 $ 7,318 $ 3,180 $ 1,422 $ 15 $ 507,108 $509,585
Average Interest Rate 5.59% 5.82% 5.24% 5.00% 4.69% 4.74% 5.60%
Floating Rate Deposits 468,603 - - - - - 468,603 468,603
Average Interest Rate 3.27% - - - - - 3.27%
Other Interest Bearing
Liabilities
Fixed Rate Debt 698 703 718 731 747 6,860 10,457 11,811
Average Interest Rate 6.17% 6.17% 6.17% 6.17% 6.17% 6.17% 6.10%
Floating Rate Debt 84,722 - - - - - 84,722 83,757
Average Interest Rate 6.20% - - - - - 6.20%
Total Financial Liabilities $999,420 $ 50,479 $ 8,036 $ 3,911 $ 2,169 $ 6,875 $1,070,890 $1,073,756
Average interest Rate 4.56% 5.82% 5.32% 5.22% 5.20% 6.17% 4.63%
(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 2001. Other time deposit 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)
2000 1999
---------------------------------------------- -------------------------------------------
Fourth Third Second First Fourth Third Second First(1)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Summary of Operations:
Interest Income $ 28,717 $ 28,018 $ 26,889 $ 25,710 $ 25,366 $ 25,236 $ 24,816 $ 24,267
Interest Expense 12,949 12,039 11,070 10,176 10,171 10,287 10,476 10,313
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Interest Income 15,768 15,979 15,819 15,534 15,195 14,949 14,340 13,954
Provision for
Loan Loss 825 735 950 610 510 610 580 740
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Interest Income
After Provision
for Loan Loss 14,943 15,244 14,869 14,924 14,685 14,339 13,760 13,214
Noninterest Income 7,046 6,646 6,675 6,402 6,655 6,719 6,634 6,553
Merger Expense 12 (2) 751 - 10 74 1,277 -
Noninterest Expense 14,847 14,684 14,503 14,352 14,463 14,522 15,040 14,442
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income Before
Provision for
Income Taxes 7,130 7,208 6,290 6,974 6,867 6,462 4,077 5,325
Provision for
Income Taxes 2,478 2,487 2,123 2,361 2,548 2,089 1,182 1,660
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 4,652 $ 4,721 $ 4,167 $ 4,613 $ 4,319 $ 4,373 $ 2,895 $ 3,665
========== ========== ========== ========== ========== ========== ========== ==========
Net Interest
Income (FTE) $ 16,134 $ 16,364 $ 16,217 $ 15,962 $ 15,521 $ 15,435 $ 14,822 $ 14,420
Per Common Share:
Net Income Basic $ .46 $ .46 $ .41 $ .45 $ .42 $ .43 $ .28 $ .36
Net Income Diluted .46 .46 .41 .45 .42 .43 .28 .36
Dividends Declared(1) .1475 .1325 .1325 .1325 .1325 .12 .12 .18
Book Value 14.56 14.08 13.51 13.20 12.96 12.78 12.56 12.80
Market Price:
High 26.75 20.50 20.50 23.00 25.00 30.00 25.00 27.63
Low 18.88 18.75 18.00 15.00 20.19 21.00 20.25 22.00
Close 24.81 19.56 19.50 19.63 21.50 22.75 25.00 23.31
Selected Average
Balances:
Loans $1,053,675 $1,025,943 $ 989,695 $ 938,351 $ 915,194 $ 892,161 $ 878,976 $ 850,161
Earning Assets 1,359,345 1,318,698 1,303,633 1,277,894 1,280,746 1,297,481 1,304,093 1,282,679
Total Assets 1,503,811 1,465,455 1,454,098 1,430,620 1,446,815 1,446,505 1,452,215 1,430,533
Total Deposits 1,223,642 1,203,254 1,202,770 1,198,608 1,235,002 1,234,360 1,247,452 1,232,816
Total Shareowners'
Equity 146,161 141,847 137,014 133,836 131,932 130,134 131,234 130,929
Common Equivalent
Shares:
Basic 10,162 10,192 10,196 10,195 10,179 10,179 10,172 10,170
Diluted 10,186 10,208 10,211 10,211 10,201 10,195 10,187 10,185
Ratios:
ROA 1.23% 1.28% 1.15% 1.30% 1.18% 1.20% .80% 1.04%
ROE 12.66% 13.24% 12.23% 13.86% 12.99% 13.33% 8.85% 11.35%
Net Interest
Margin (FTE) 4.73% 4.94% 5.00% 5.02% 4.82% 4.73% 4.56% 4.56%
Efficiency Ratio 61.03% 60.64% 60.30% 60.91% 60.67% 62.30% 66.70% 65.46%
(1) First quarter 1999 dividend includes a one-time distribution paid to
Grady Holding Company shareowners of approximately $563,000.
CONSOLIDATED FINANCIAL STATEMENTS
44 Report of Independent Certified Public Accountants
45 Consolidated Statements of Income
46 Consolidated Statements of Financial Condition
47 Consolidated Statements of Changes in Shareowners' Equity
48 Consolidated Statements of Cash Flows
49 Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareowners 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, 2000 and 1999, and the related
consolidated statements of income, changes in shareowners' equity, and
cash flows for each of the three years in the period ended December
31, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. 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, 2000 and
1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United
States.
ARTHUR ANDERSEN LLP
Jacksonville, Florida
January 25, 2001
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)(1)
For the Years Ended December 31,
----------------------------------
2000 1999 1998
- ------------------------------------------------------------------------------
INTEREST INCOME
Interest and Fees on Loans $ 92,306 $78,527 $75,989
Investment Securities:
U.S. Treasury 696 1,430 1,889
U.S. Government Agencies/Corp. 8,632 9,313 3,879
States and Political Subdivisions 4,006 4,371 3,028
Other Securities 2,373 2,486 649
Funds Sold 1,321 3,558 3,576
-------- ------- -------
Total Interest Income 109,334 99,685 89,010
INTEREST EXPENSE
Deposits 40,459 38,315 32,119
Short-Term Borrowings 4,968 1,816 1,904
Long-Term Debt 807 1,116 1,225
-------- ------- -------
Total Interest Expense 46,234 41,247 35,248
-------- ------- -------
Net Interest Income 63,100 58,438 53,762
Provision for Loan Losses 3,120 2,440 2,439
-------- ------- -------
Net Interest Income After Provision for
Loan Losses 59,980 55,998 51,323
-------- ------- -------
NONINTEREST INCOME
Service Charges on Deposit Accounts 9,380 9,973 8,541
Data Processing 2,525 2,861 3,523
Income from Fiduciary Activities 2,435 2,227 1,761
Securities Transactions 2 (12) 87
Other 12,427 11,512 10,472
-------- ------- -------
Total Noninterest Income 26,769 26,561 24,384
-------- ------- -------
NONINTEREST EXPENSE
Salaries and Associate Benefits 29,967 28,969 26,597
Occupancy, Net 4,638 4,466 3,530
Furniture and Equipment 5,779 5,647 5,280
Merger Expense 761 1,361 115
Other 18,002 19,385 16,722
-------- ------- -------
Total Noninterest Expense 59,147 59,828 52,244
-------- ------- -------
Income Before Income Taxes 27,602 22,731 23,463
Income Taxes 9,449 7,479 8,169
-------- ------- -------
NET INCOME $ 18,153 $15,252 $15,294
======== ======= =======
BASIC NET INCOME PER SHARE $ 1.78 $ 1.50 $ 1.51
======== ======= =======
DILUTED NET INCOME PER SHARE $ 1.78 $ 1.50 $ 1.50
======== ======= =======
Basic Average Common Shares Outstanding 10,186 10,175 10,146
======== ======= =======
Diluted Average Common Shares Outstanding 10,215 10,196 10,168
======== ======= =======
(1) All share and per share data have been restated to reflect the
pooling-of-interests of Grady Holding Company and its subsidiaries and
adjusted to reflect the 3-for-2 stock split effective June 1, 1998.
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands, Except Per Share Data)(1)
As of December 31,
----------------------------
2000 1999
- ---------------------------------------------------------------------------------
ASSETS
Cash and Due From Banks $ 73,367 $ 79,454
Funds Sold 40,623 13,618
Investment Securities, Available-for-Sale 276,839 321,192
Loans, Net of Unearned Interest 1,051,832 928,486
Allowance for Loan Losses (10,564) (9,929)
---------- ----------
Loans, Net 1,041,268 918,557
Premises and Equipment 37,023 37,834
Intangibles 22,293 25,149
Other Assets 36,047 34,716
---------- ----------
Total Assets $1,527,460 $1,430,520
========== ==========
LIABILITIES
Deposits:
Noninterest Bearing Deposits $ 292,656 $ 253,140
Interest Bearing Deposits 975,711 949,518
---------- ----------
Total Deposits 1,268,367 1,202,658
Short-Term Borrowings 83,472 66,275
Long-Term Debt 11,707 14,258
Other Liabilities 16,307 15,113
---------- ----------
Total Liabilities 1,379,853 1,298,304
SHAREOWNERS' EQUITY
Preferred Stock, $.01 par value, 3,000,000 shares
authorized; no shares issued and outstanding - -
Common Stock, $.01 par value; 90,000,000 shares
authorized; 10,108,454 and 10,190,069 shares
issued and outstanding 101 102
Additional Paid-In Capital 7,369 9,249
Retained Earnings 141,659 129,055
Accumulated Other Comprehensive Loss, Net of Tax (1,522) (6,190)
---------- ----------
Total Shareowners' Equity 147,607 132,216
---------- ----------
Total Liabilities and Shareowners' Equity $1,527,460 $1,430,520
========== ==========
(1) All share and per share data have been restated to reflect the
pooling-of-interests of Grady Holding Company and its subsidiaries.
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
(Dollars in Thousands, Except per Share Data)(1)
Accumulated Other
Additional Comprehensive
Common Paid-In Retained (Loss) Income,
Stock Capital Earnings Net of Taxes Total
- ------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 $101 $6,544 $108,555 $ 607 $115,807
Net Income 15,294 15,294
Cash Dividends ($.45 per share) (4,328) (4,328)
Issuance of Common Stock 1 2,017 2,018
Net Change in Unrealized Gain (Loss)
On Marketable Securities 71 71
---- ------ -------- ------- --------
Balance, December 31, 1998 102 8,561 119,521 678 128,862
Net Income 15,252 15,252
Cash Dividends ($.5525 per share)(2) (5,718) (5,718)
Issuance of Common Stock 688 688
Net Change in Unrealized Gain (Loss)
On Marketable Securities (6,868) (6,868)
---- ------ -------- ------- --------
Balance, December 31, 1999 102 9,249 129,055 (6,190) 132,216
Net Income 18,153 18,153
Cash Dividends ($.545 per share) (5,549) (5,549)
Issuance of Common Stock 786 786
Repurchase of Common Stock (1) (2,666) (2,667)
Net Change in Unrealized Gain (Loss)
On Marketable Securities 4,668 4,668
---- ------ -------- ------- --------
Balance, December 31, 2000 $101 $7,369 $141,659 $(1,522) $147,607
==== ====== ======== ======= ========
(1) All share and per share data have been restated to reflect the pooling-of-
interests of Grady Holding Company and its subsidiaries and adjusted to reflect
the 3-for-2 stock split effective June 1, 1998.
(2) Dividend amount includes a one-time distribution paid to Grady Holding
Company shareowners of approximately $563,000.
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,
----------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 18,153 $ 15,252 $ 15,294
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 3,120 2,440 2,439
Depreciation 3,979 3,708 3,565
Net Securities Amortization 1,368 1,417 758
Amortization of Intangible Assets 2,837 2,833 1,191
(Gain) Loss on Sale of Investment Securities (2) 12 (87)
Non-Cash Compensation 101 260 869
Deferred Income Taxes (293) (225) 133
Net Increase in Other Assets (3,709) (230) (11,019)
Net Increase (Decrease) in Other Liabilities 1,194 (1,000) 3,125
-------- -------- --------
Net Cash Provided by Operating Activities 26,748 24,467 16,268
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITES:
Proceeds from Payments/Maturities of
Investment Securities Available-for-Sale 50,837 104,189 84,524
Purchase of Investment Securities
Available-for-Sale (492) (66,031) (123,537)
Net Increase in Loans (125,831) (86,608) (26,388)
Net Cash Received From Acquisitions - - 36,726
Purchase of Premises & Equipment (3,236) (4,471) (4,323)
Sales of Premises & Equipment 69 100 407
-------- -------- --------
Net Cash Used in Investing Activities (78,653) (52,821) (32,591)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITES:
Net Increase (Decrease) in Deposits 65,709 (50,895) 55,082
Net Increase (Decrease) in Short-Term Borrowings 17,196 41,076 (20,914)
Borrowing from Long-Term Debt 1,428 2,262 8,241
Repayment of Long-Term Debt (3,979) (6,750) (7,600)
Dividends Paid(1) (5,549) (5,718) (4,281)
Repurchase of Common Stock (2,667) - -
Issuance of Common Stock 685 428 1,148
-------- -------- --------
Net Cash Provided By (Used in)
Financing Activities 72,823 (19,597) 31,676
-------- -------- --------
Net Increase (Decrease) in Cash
and Cash Equivalents 20,918 (47,951) 15,353
Cash and Cash Equivalents at Beginning of Year 93,072 141,023 125,670
-------- -------- --------
Cash and Cash Equivalents at End of Year $113,990 $ 93,072 $141,023
======== ======== ========
Supplemental Disclosures:
Interest Paid on Deposits $ 41,863 $ 38,822 $ 31,179
======== ======== ========
Interest Paid on Debt $ 5,873 $ 2,849 $ 3,128
======== ======== ========
Taxes Paid $ 10,878 $ 6,137 $ 8,470
======== ======== ========
Loans Transferred To Other Real Estate $ 904 $ 1,344 $ 2,011
======== ======== ========
(1) Dividend amount includes a one-time distribution to Grady Holding
Company shareowners of approximately $563,000, paid during the first
quarter of 1999.
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
Notes to Consolidated Financial Statements
Note 1
SIGNIFICANT ACCOUNTING POLICIES
Basis 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. The historical financial statements have been
restated for the acquisition of Grady Holding Company and its
subsidiaries which were accounted for as a pooling-of-interests (see
Note 2). 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 three-for-
two stock split effective June 1, 1998. 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 in the accumulated other comprehensive income
component of shareowners' 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 losses
inherent 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 with premises being depreciated
over a range of 10 to 40 years, and equipment being depreciated over a
range of 3 to 10 years. 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 and core deposit
assets that were recognized in connection with the various
acquisitions. 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 $2.8 million in 2000 and 1999, and $1.2 million in 1998.
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
expense benefits 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.
Accounting Pronouncements
In September 2000, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 140
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", a replacement of SFAS No. 125. The
statement revises the standards for accounting for securitizations and
other transfers of financial assets and collateral and requires
certain disclosures. The statement is effective for fiscal years
ending after December 15, 2000. The adoption of this standard did not
have a material impact on reported results of operations of the
Company.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" as amended. The statement
establishes accounting and reporting standards for derivative
instruments (including certain derivative instruments imbedded in
other contracts). The statement is effective for fiscal years
beginning after June 15, 2000. The adoption of this standard did not
have a material impact on reported results of operations of the
Company.
Business Segments
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" requires disclosure of certain information about
reportable business segments of the Company. The Company operates in
a single business segment, which is comprised of commercial banking
within the state of Florida and Georgia.
Note 2
ACQUISITIONS
During the first quarter of 2001, the Company plans to complete its
acquisition of First Bankshares of West Point, Inc., and its
subsidiary First National Bank of West Point. First National Bank of
West Point is a $155 million financial institution with offices
located in West Point, Georgia, and two offices in the Greater Valley
area of Alabama. First Bankshares of West Point, Inc., will merge
with CCBG, and First National Bank of West Point will merge with CCB.
The Company will issue 3.6419 shares and $17.7543 in cash for each of
the 192,481 shares of First Bankshares of West Point, Inc. The
transaction will be accounted for as a purchase and result in
approximately $5.0 million of intangibles, primarily goodwill. These
intangible assets will be amortized over fifteen years.
During the first quarter of 2001, the Company plans to complete its
purchase and assumption agreement with First Union National Bank
("First Union") to acquire six of First Union's offices which includes
real estate, loans and deposits. The transaction will create
approximately $11.5 million in intangible assets which will be
amortized over 10 years. The Company agreed to purchase approximately
$26 million in loans and assume deposits of approximately $109
million.
On May 7, 1999, the Company completed its acquisition of Grady Holding
Company ("GHC") and its subsidiary, First National Bank of Grady
County in Cairo, Georgia. First National Bank of Grady County is a
$119 million asset institution with offices in Cairo and Whigham,
Georgia. The Company issued 21.50 shares for each of the 60,910 shares
of First National Bank of Grady County. The consolidated financial
statements of the Company give effect to the merger which has been
accounted for as a pooling-of-interests. Accordingly, financial
statements for the prior periods have been restated to reflect the
results of operations of these entities on a combined basis from the
earliest period presented.
On December 4, 1998, the Company completed its first purchase and
assumption transaction with First Union and acquired eight of First
Union's offices which included deposits. The Company paid a premium
of approximately $16.9 million, and assumed approximately $219 million
in deposits and acquired certain real estate. The 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 offices which included loans and deposits. The Company paid
a deposit premium of $3.6 million, 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 its expected useful life.
Note 3
INVESTMENT SECURITIES
The amortized cost and related market value of investment securities
available-for-sale at December 31, were as follows:
2000
--------------------------------------------------
Amortized Unrealized Unrealized Market
(Dollars in Thousands) Cost Gains Losses Value
- ------------------------------------------------------------------------------
U.S. Treasury $ 10,016 $ 5 $ - $ 10,021
U.S. Government Agencies
and Corporations 69,683 49 516 69,216
States and Political
Subdivisions 85,744 192 695 85,241
Mortgage-Backed Securities 73,741 134 1,126 72,749
Other Securities 40,058 7 453 39,612
-------- ---- ------ --------
Total Investment
Securities $279,242 $387 $2,790 $276,839
======== ==== ====== ========
1999
--------------------------------------------------
Amortized Unrealized Unrealized Market
(Dollars in Thousands) Cost Gains Losses Value
- ------------------------------------------------------------------------------
U.S. Treasury $ 20,047 $ 4 $ 70 $ 19,981
U.S. Government Agencies
and Corporations 79,181 - 2,557 76,624
States and Political
Subdivisions 104,312 74 1,895 102,491
Mortgage-Backed Securities 85,040 88 3,728 81,400
Other Securities 42,372 - 1,676 40,696
-------- ---- ------ --------
Total Investment
Securities $330,952 $166 $9,926 $321,192
======== ==== ====== ========
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 are as follows:
(Dollars in Thousands)
Total Gross Gross
Year Proceeds Realized Gains Realized Losses
- -------------------------------------------------------------
2000 $37,096 $ 2 $ -
1999 $86,213 $ 1 $13
1998 $46,861 $117 $30
Total proceeds include principal reductions in mortgage-backed
securities and proceeds from securities which were called of $13.7
million, $18.0 million, and $27.2 million in 2000, 1999, and 1998,
respectively.
As of December 31, 2000, 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 $ 40,279 $ 40,265
Due after one through five years 150,917 149,523
Due after five through ten years 8,294 8,307
Over ten years 6,011 5,995
Mortgage-Backed Securities 73,741 72,749
-------- --------
Total Investment Securities $279,242 $276,839
======== ========
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 $141.2 million and $143.1 million
at December 31, 2000 and 1999, 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) 2000 1999
- -------------------------------------------------------------
Commercial, Financial and
Agricultural $ 108,340 $ 98,894
Real Estate - Construction 84,133 62,166
Real Estate - Mortgage 231,099 214,036
Real Estate - Residential 444,489 383,536
Consumer 183,771 169,854
---------- --------
Total Loans,
Net of Unearned Interest $1,051,832 $928,486
========== ========
Nonaccruing loans amounted to $2.9 million and $3.0 million, at
December 31, 2000 and 1999, respectively. Restructured loans amounted
to $19,000 and $26,000, at December 31, 2000 and 1999, respectively.
If such nonaccruing and restructured loans had been on a fully
accruing basis, interest income would have been $291,000 higher in
2000 and $317,000 higher in 1999.
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) 2000 1999 1998
- ------------------------------------------------------------------------
Balance, Beginning of Year $ 9,929 $9,827 $9,662
Provision for Loan Losses 3,120 2,440 2,439
Recoveries on Loans
Previously Charged-Off 703 860 883
Loans Charged-Off (3,188) (3,198) (3,157)
------- ------ ------
Balance, End of Year $10,564 $9,929 $9,827
======= ====== ======
Selected information pertaining to impaired loans, at December 31, is
as follows:
2000 1999
Valuation Valuation
(Dollars in Thousands) Balance Allowance Balance Allowance
- -----------------------------------------------------------------------------
With Related Credit Allowance $ - $- $ 25 $3
Without Related Credit Allowance 1,009 - 1,238 -
Average Recorded Investment
for the Period $1,687 $- $1,871 $-
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, 2000, 1999, and 1998 the Company recognized $86,000,
$74,000, and $84,000, in interest income on impaired loans, of which
$77,000, $57,000, and $31,000, 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) 2000 1999
- ----------------------------------------------------------
Land $ 9,458 $ 9,289
Buildings 34,259 33,948
Fixtures and Equipment 32,587 30,229
------- -------
Total 76,304 73,466
Accumulated Depreciation (39,281) (35,632)
------- -------
Premises and Equipment, Net $37,023 $37,834
======= =======
Note 7
DEPOSITS
Interest bearing deposits, by category, as of December 31, were as
follows:
(Dollars in Thousands) 2000 1999
- ----------------------------------------------------
NOW Accounts $207,978 $182,794
Money Market Accounts 156,590 157,825
Savings Accounts 104,035 105,498
Other Time Deposits 507,108 503,401
-------- --------
Total $975,711 $949,518
======== ========
Time deposits in denominations of $100,000 or more totaled $95.1
million and $101.7 million at December 31, 2000 and 1999,
respectively.
At December 31, 2000, the scheduled maturities of other time deposits
were as follows:
2001 $445,397
2002 49,776
2003 7,318
2004 3,180
2005 and thereafter 1,437
--------
$507,108
========
The average balances maintained on deposit with the Federal Reserve
Bank for the years ended December 31, 2000 and 1999, were $34.8
million and $34.4 million, respectively.
Interest expense on deposits for the three years ended December 31,
was as follows:
(Dollars in Thousands) 2000 1999 1998
- ----------------------------------------------------------------
NOW Accounts $ 4,444 $ 3,134 $ 2,223
Money Market Accounts 6,673 5,766 2,562
Savings Accounts 2,446 2,453 2,243
Other Time Deposits 26,896 26,962 25,091
------- ------- -------
Total $40,459 $38,315 $32,119
======= ======= =======
Note 8
SHORT-TERM BORROWINGS
Short-term borrowings included the following at December 31:
Securities
Federal Sold Under Other
Funds Repurchase Short-Term
(Dollars in Thousands) Purchased Agreements Borrowings
- --------------------------------------------------------------------------------
2000
Balance $ 7,225 $44,478 $31,769
Maximum indebtedness at any month end 39,975 60,283 61,269
Daily average indebtedness outstanding 18,612 44,908 22,599
Average rate paid for the year 6.47% 4.95% 6.83%
Average rate paid on period-end borrowings 4.88% 4.32% 6.84%
1999
Balance $28,050 $36,439 $ 1,786
Maximum indebtedness at any month end 28,050 41,114 1,786
Daily average indebtedness outstanding 12,997 27,923 1,397
Average rate paid for the year 4.87% 4.02% 4.31%
Average rate paid on period-end borrowings 4.20% 3.53% 4.22%
Note 9
LONG-TERM DEBT
Long-term debt included the following at December 31:
(Dollars in Thousands) 2000 1999
- ------------------------------------------------------------------------------
Federal Home Loan Bank Note
Due on October 10, 2001, fixed rate of 5.00% $ 286 $ 324
Due on December 16, 2004, fixed rate of 6.52% 250 313
Due on December 16, 2004, fixed rate of 6.52% 138 172
Due on December 19, 2005, fixed rate of 6.04% 1,432 1,542
Due on December 13, 2006, fixed rate of 6.20% 936 1,002
Due on April 24, 2007, fixed rate of 7.30% 362 419
Due on March 14, 2013, fixed rate of 6.13% - 938
Due on March 18, 2013, fixed rate of 6.37% 898 -
Due on September 20, 2013, fixed rate of 5.64% 1,277 1,334
Due on January 26, 2014, fixed rate of 5.79% 1,463 1,499
Due on May 27, 2014, fixed rate of 5.92% 683 720
Due on December 17, 2018, fixed rate of 6.33% 1,895 1,949
Due on December 24, 2018, fixed rate of 6.29% 837 857
IBM Note Payable
Due on December 31, 2000, fixed rate of 3.77% - 189
Revolving credit note,
Due on November 16, 2004, variable rate of 6.68% 1,250 3,000
------- -------
Total outstanding $11,707 $14,258
======= =======
The contractual maturities of long-term debt for the five years
succeeding December 31, 2000, are as follows:
2001 $ 286
2002 -
2003 -
2004 1,638
2005 and thereafter 9,783
-------
$11,707
=======
The Federal Home Loan Bank advances are collateralized with U.S.
Treasury Securities and 1-4 family mortgages. Interest on the Federal
Home Loan Bank advances is paid on a monthly basis.
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 lender's cost of funds
rate, plus or minus increments thereof. The LIBOR or cost of funds
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, 2000, the Company was in compliance with all
of the terms of the agreement and had $23.75 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) 2000 1999 1998
- ----------------------------------------------------------------------
Current:
Federal $8,172 $6,880 $7,185
State 1,570 824 851
Deferred:
Federal (245) (189) 117
State (48) (36) 16
------ ------ ------
Total $9,449 $7,479 $8,169
====== ====== ======
The net deferred tax asset and the temporary differences comprising
that balance at December 31, 2000 and 1999, are as follows:
(Dollars in Thousands) 2000 1999
- --------------------------------------------------------------------
Deferred Tax Asset attributable to:
Allowance for Loan Losses $2,841 $2,909
Unrealized Losses on Investment Securities 881 3,570
Stock Incentive Plan 875 682
Interest on Nonperforming Loans 57 169
Acquired Deposits 392 76
Acquisition Integration Costs 111 -
Other 392 306
------ ------
Total Deferred Tax Asset $5,549 $7,712
Deferred Tax Liability attributable to:
Associate Benefits $1,347 $1,291
Premises and Equipment 1,421 1,189
Deferred Loan Fees 291 370
Securities Accretion 210 249
Other 167 104
------ ------
Total Deferred Tax Liability 3,436 3,203
------ ------
Net Deferred Tax Asset $2,113 $4,509
====== ======
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) 2000 1999 1998
- --------------------------------------------------------------------
Computed Tax Expense $9,661 $7,956 $8,212
Increases (Decreases)
Resulting From:
Tax-Exempt Interest Income (1,357) (1,409) (972)
State Income Taxes,
Net of Federal Income
Tax Benefit 1,000 468 544
Other 145 464 385
------ ------ ------
Actual Tax Expense $9,449 $7,479 $8,169
====== ====== ======
Note 11
ASSOCIATE BENEFITS
The Company sponsors a noncontributory pension plan covering
substantially all of its associates. 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) 2000 1999 1998
- -------------------------------------------------------------------------------
Change in Benefit Obligation:
Benefit Obligation at Beginning of Year $18,980 $22,211 $21,159
Service Cost 2,255 2,015 1,678
Interest Cost 1,777 1,477 1,478
Actuarial Loss/(Gain) 3,019 (4,411) 1,350
Amendments to Plan(1) 2,099 - -
Benefits Paid (1,119) (2,021) (3,186)
Expenses Paid (200) (291) (268)
------- ------- -------
Benefit Obligation at End of Year $26,811 $18,980 $22,211
------- ------- -------
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year $32,521 $29,248 $25,826
Actual Return on Plan Assets (798) 4,824 5,382
Employer Contribution 915 761 1,494
Benefits Paid (1,119) (2,021) (3,186)
Expenses Paid (200) (291) (268)
------- ------- -------
Fair Value of Plan Assets at End of Year $31,319 $32,521 $29,248
------- ------- -------
Funded Status $ 4,508 $13,541 $ 7,037
Unrecognized Net Actuarial Gain (797) (9,675) (2,919)
Unrecognized Prior Service Cost (232) (468) (704)
------- ------- -------
Prepaid Benefit Cost $ 3,479 $ 3,398 $ 3,414
======= ======= =======
Weighted-Average Assumptions:
Discount Rate 7.50% 7.75% 6.50%
Expected Return on Plan Assets 8.25% 8.25% 8.25%
Rate of Compensation Increase 5.50% 5.50% 5.50%
Components of Net Periodic Benefit Costs:
Service Cost $ 2,255 $ 2,015 $ 1,678
Interest Cost 1,777 1,477 1,478
Expected Return on Plan Assets (2,643) (2,401) (2,103)
Amortization of Prior Service Cost 343 164 164
Transition Asset Recognition (236) (236) (236)
Recognized Net Actuarial Gain (663) (242) (131)
------- ------- -------
Net Periodic Benefit Cost $ 833 $ 777 $ 850
======= ======= =======
(1) The amendments to the plan are a result of prior year acquisitions
and the IRS regulation regarding the change from the PBGC
mortality table to the GATT mortality table.
The Company has 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 2000, 1999 and 1998 of $167,000, $266,000 and $193,000,
respectively, and no minimum liability, at December 31, 2000, 1999 and
1998, respectively.
The Company has an Associate Incentive Plan under which shares of the
Company's stock are issued as incentive awards to selected
participants. Seven hundred fifty thousand shares of common stock are
reserved for issuance under this plan. The expense recorded related
to this plan was approximately $561,000, $432,000 and $735,000 in
2000, 1999 and 1998, respectively. The Company issued 5,775 shares
under the plan in 2000.
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. Four hundred fifty
thousand shares of common stock are reserved for issuance under the
Stock Purchase Plan. The Company issued 26,397 shares under the plan
in 2000.
The Company has a Director Stock Purchase Plan. One hundred fifty
thousand shares have been reserved for issuance. In 2000, the Company
issued 5,001 shares under this plan.
The Company has 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
2000, no contributions were made by the Company. The participant may
choose to invest their contributions into fifteen investment funds
available to CCBG participants, including the Company's common stock.
The Company has a Dividend Reinvestment and Optional Stock Purchase
Plan. Seven hundred fifty thousand shares have been reserved for
issuance. In recent years, shares for the Dividend Reinvestment and
Optional Stock Purchase Plan have been acquired in the open market
and, thus, the Company did not issue any shares under this plan in 2000.
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)
2000 1999 1998
------------------------------------
Numerator:
Net Income $ 18,153 $ 15,252 $ 15,294
Preferred Stock Dividends - - -
---------- ---------- ----------
Numerator for Basic Earnings Per Share
Income to Common Shareowners 18,153 15,252 15,294
---------- ---------- ----------
Effect of Dilutive securities:
Preferred stock dividends - - -
---------- ---------- ----------
Numerator for Diluted Earnings Per Share
Income Available to Common Shareowners
After Assumed Conversions $ 18,153 $ 15,252 $ 15,294
========== ========== ==========
Denominator:
Denominator for Basic Earnings Per Share
Weighted-Average Shares 10,186,199 10,174,945 10,146,393
Effects of Dilutive Securities:
Associate Stock Incentive Plan 28,643 21,288 21,237
---------- ---------- ----------
Dilutive Potential Common Shares 28,643 21,288 21,237
---------- ---------- ----------
Denominator for Diluted Earnings Per Share
Adjusted Weighted-Average Shares and
Assumed Conversions 10,214,842 10,196,233 10,167,630
========== ========== ==========
Basic Earnings Per Share $ 1.78 $ 1.50 $ 1.51
========== ========== ==========
Diluted Earnings per Share $ 1.78 $ 1.50 $ 1.50
========== ========== ==========
(1) All share and per share data have been restated to reflect the
pooling-of-interests of Grady Holding Company and its subsidiaries and
adjusted to reflect the 3-for-2 stock split effective June 1, 1998.
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, 2000, 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.
consolidated and its banking subsidiary, Capital City Bank, as of
December 31, 2000 and December 31, 1999 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, 2000:
Tier I Capital:
CCBG $126,836 11.87% $42,753 4.00% * *
CCB 108,474 11.00% 39,451 4.00% 59,177 6.00%
Total Capital:
CCBG 137,400 12.86% 85,507 8.00% * *
CCB 117,440 11.91% 78,902 8.00% 98,628 10.00%
Tier I Leverage:
CCBG 126,836 8.30% 32,065 3.00% * *
CCB 108,474 7.59% 29,589 3.00% 49,314 5.00%
As of December 31, 1999:
Tier I Capital:
CCBG $107,076 11.23% $38,138 4.00% * *
CCB 91,832 10.65% 34,490 4.00% 51,736 6.00%
Total Capital:
CCBG 117,005 12.27% 76,276 8.00% * *
CCB 100,351 11.64% 68,981 8.00% 86,226 10.00%
Tier I Leverage:
CCBG 107,076 7.92% 28,604 3.00% * *
CCB 91,832 7.39% 25,868 3.00% 43,113 5.00%
*Non-applicable to bank holding companies.
Note 14
DIVIDEND RESTRICTIONS
Substantially all the Company's retained earnings are undistributed
earnings of its banking subsidiaries, 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 2001, the bank subsidiaries may declare dividends
without regulatory approval of $18.3 million plus an additional amount
equal to the net profits of the Company's subsidiary banks for 2001 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 $335,000,
$320,000 and $340,000 during 2000, 1999 and 1998, 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 $81,000, to be adjusted for inflation in future years.
At December 31, 2000 and 1999, certain officers and directors were
indebted to the Company's bank subsidiaries in the aggregate amount of
$12.0 million and $8.6 million, respectively. During 2000, $13.4
million in new loans were made and repayments and other totaled $10.0
million. 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 the sum total of
interest income and noninterest income, which are not disclosed
separately elsewhere, are presented below for each of the respective
years.
(Dollars in Thousands) 2000 1999 1998
- -------------------------------------------------------------------
Noninterest Income:
Merchant Fee Income $3,388 $2,993 $2,984
Interchange Commission Fees 1,718 1,269 1,004
Gains on the Sale of
Real Estate Loans 1,265 1,607 1,625
Noninterest Expense:
Associate Insurance 1,697 1,653 1,448
Payroll Taxes 1,710 1,647 1,485
Maintenance and Repairs 2,972 3,106 2,773
Professional Fees 1,331 1,173 1,337
Printing & Supplies 1,590 1,720 1,811
Commission/Service Fees 3,517 3,107 3,136
Telephone 1,147* 1,440 1,158
*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, 2000, the amounts associated with the Company's off-balance-sheet
obligations were as follows:
(Dollars in Thousands) Amount
- ----------------------------------------------------------
Commitments to Extend Credit(1) $296,348
Standby Letters of Credit $ 2,331
(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:
At December 31,
(Dollars in Thousands) 2000 1999
- --------------------------------------------------------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
- --------------------------------------------------------------------------
Financial Assets:
Loans, Net of Allowance
for Loan Losses $1,041,268 $1,068,945 $ 918,557 $ 908,766
Financial Liabilities
Deposits $1,268,367 $1,271,516 $1,202,658 $1,200,875
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 operating results of the parent company for the three years ended
December 31, are shown below:
Parent Company Statements of Income
(Dollars in Thousands) 2000 1999 1998
- -------------------------------------------------------------------------------
OPERATING INCOME
Income Received from Subsidiary Banks:
Dividends $ 8,713 $ 7,285 $ 7,190
Overhead Fees 2,373 2,595 4,007
------- ------- -------
Total Operating Income 11,086 9,880 11,197
------- ------- -------
OPERATING EXPENSE
Salaries and Associate Benefits 1,715 1,926 2,171
Interest on Debt 147 430 832
Professional Fees 332 232 527
Advertising 100 109 711
Legal Fees 67 77 115
Other 341 257 696
------- ------- -------
Total Operating Expense 2,702 3,031 5,052
------- ------- -------
Income Before Income Taxes and Equity
in Undistributed Earnings of Subsidiary Banks 8,384 6,849 6,145
Income Tax Benefit (121) (198) (394)
------- ------- -------
Income Before Equity in Undistributed
Earnings of Subsidiary Banks 8,505 7,047 6,539
Equity in Undistributed Earnings
of Subsidiary Banks 9,648 8,205 8,755
------- ------- -------
Net Income $18,153 $15,252 $15,294
======= ======= =======
The following are condensed statements of financial condition of the
parent company at December 31:
Parent Company Statements of Financial Condition
(Dollars in Thousands) 2000 1999
- ----------------------------------------------------------------------------
ASSETS
Cash and Due From Group Banks $ 187 $ 2,020
Investment in Subsidiary Banks 148,412 134,105
Other Assets 1,454 520
-------- --------
Total Assets $150,053 $136,645
======== ========
LIABILITIES
Long-Term Debt $ 1,250 $ 3,000
Other Liabilities 1,196 1,429
-------- --------
Total Liabilities 2,446 4,429
-------- --------
SHAREOWNERS' EQUITY
Preferred Stock, $.01 par value, 3,000,000 shares
authorized; no shares issued and outstanding - -
Common Stock, $.01 par value; 90,000,000
shares authorized; 10,108,454 and 10,190,069
shares issued and outstanding 101 102
Additional Paid-in Capital 7,369 9,249
Retained Earnings 141,659 129,055
Accumulated Other Comprehensive Loss, Net of Tax (1,522) (6,190)
-------- --------
Total Shareowners' Equity 147,607 132,216
-------- --------
Total Liabilities and Shareowners' Equity $150,053 $136,645
======== ========
The cash flows for the parent company for the three years ended
December 31, were as follows:
Parent Company Statements of Cash Flows
2000 1999 1998
- ------------------------------------------------------------------------------
Cash Flows From Operating Activities:
Net Income $18,153 $15,252 $15,294
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Equity in Undistributed
Earnings of Subsidiary Banks (9,648) (8,205) (8,755)
Non-Cash Compensation 101 260 868
Amortization of Goodwill - - 25
(Increase) Decrease in Other Assets (925) (40) 1,155
(Decrease) Increase in Other Liabilities (233) 292 (357)
------- ------- -------
Net Cash Provided by Operating Activities 7,448 7,559 8,230
------- ------- -------
Cash From Financing Activities:
Borrowings of Long-Term Debt 500 - -
Repayments of Long-Term Debt (2,250) (5,000) (5,000)
Payment of Dividends (5,549) (5,718) (4,328)
Repurchase of Common Stock (2,667) - -
Issuance of Common Stock 685 428 1,148
------- ------- -------
Net Cash Used in Financing Activities (9,281) (10,290) (8,180)
------- ------- -------
Net (Decrease) Increase in Cash (1,833) (2,729) 50
Cash at Beginning of Period 2,020 4,749 4,699
------- ------- -------
Cash at End of Period $ 187 $ 2,020 $ 4,749
======= ======= =======
Note 20
COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income", requires that certain
transactions and other economic events that bypass the income
statement be displayed as other comprehensive income. The Company's
comprehensive income consists of net income and changes in unrealized
gains (losses) on securities available-for-sale, net of income taxes.
Comprehensive income for 2000, 1999 and 1998 was calculated as
follows:
(Dollars in Thousands) 2000 1999 1998
- --------------------------------------------------------------------------------
Net Unrealized Gains (Losses)
Recognized in Other Comprehensive Income:
Before Tax $ 7,357 $(10,566) $ 109
Less Income Tax 2,689 (3,698) 38
------- -------- -------
Net of Tax 4,668 (6,868) 71
Amounts Reported in Net Income:
Gain (Loss) On Sale of Securities 2 (12) 87
Net Amortization 1,368 1,417 758
------- -------- -------
Reclassification Adjustment 1,370 1,405 845
Less: Income Tax Expense 480 492 296
------- -------- -------
Reclassification Adjustment, Net of Tax 890 913 549
Amounts Reported in Other Comprehensive Income:
Unrealized (Loss) Gain Arising During the
Period, Net of Tax 5,558 (5,955) 620
Net Unrealized Losses Recognized in
Reclassification Adjustments, Net of Tax (890) (913) (549)
------- -------- -------
Other Comprehensive Income 4,668 (6,868) 71
Net Income 18,153 15,252 15,294
------- -------- -------
Total Comprehensive Income $22,821 $ 8,384 $15,365
======= ======== =======
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 "Nominees
for Election as Directors" and "Continuing Directors and Executive
Officers" in the Registrant's Proxy Statement dated April 3, 2001, to
be filed on or about April 3, 2001.
Item 11. Executive Compensation
Incorporated herein by reference to the sections entitled "Summary
Compensation Table", "Compensation Committee Report" and "Five-Year
Performance Graph" and the subsection entitled "What are directors
paid for their services?" under the section entitled "Corporate
Governance" in the Registrant's Proxy Statement dated April 3, 2001,
to be filed on or about April 3, 2001.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference to the section entitled "Share
Ownership" in the Registrant's Proxy Statement dated April 3, 2001, to
be filed on or about April 3, 2001.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the subsection entitled
"Transactions With Management and Related Parties" under the section
entitled "Executive Officers and Transactions with Management" in the
Registrant's Proxy Statement dated April 3, 2001, to be filed on or
about April 3, 2001.
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 Income for each of the three years in the
period ended December 31, 2000
Consolidated Statements of Financial Condition for the years ended
December 31, 2000 and 1999
Consolidated Statements of Changes in Shareowners' Equity for each of
the three years in the period ended December 31, 2000
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 2000
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 (File No. 0-13358).
2(b) Purchase and Assumption Agreement, dated as of August 26, 1998,
by and between Capital City Bank and First Union National Bank, is
incorporated herein by reference to Registrant's Form 8-K as filed
with the Commission on December 21, 1998.
2(c) Agreement and Plan of Merger, dated as of February 11, 1999, by
and among Capital City Bank Group, Inc., Grady Holding Company and
First National Bank of Grady County is incorporated herein by
reference to the Registrant's Form 8-K as filed with the Commission on
March 26, 1999 (File No. 0-13358).
2(d) Agreement and Plan of Merger, dated as of September 25, 2000, by
and between Capital City Bank Group, Inc. and First Bankshares of West
Point, Inc., is filed herewith.
2(e) Purchase and Assumption Agreement, dated as of October 3, 2000,
by and between Capital City Bank and First Union National 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 (File No. 0-13358).
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 (File No. 0-13358).
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. Amended and Restated 1996
Director Stock Purchase Plan is incorporated herein by reference to
the Registrant's Form 10-K dated March 30, 2000 (File No. 0-13358).
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 (File No. 333-20683).
21 A listing of Capital City Bank Group's subsidiaries is filed herewith.
23(a) Consent of Independent Certified Public Accountants
14(b) REPORTS ON FORM 8-K
Capital City Bank Group, Inc., filed no Form 8-K during the fourth
quarter 2000.
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 22, 2001, 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 22, 2001 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 /s/ Lina S. Knox
- ------------------------------ -----------------------------
DuBose Ausley Lina S. Knox
/s/ Thomas A. Barron /s/ John R. Lewis
- ------------------------------ -----------------------------
Thomas A. Barron John R. Lewis
/s/ Cader B. Cox, III /s/ William G. Smith, Jr.
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Cader B. Cox, III William G. Smith, Jr.
/s/ John K. Humphress /s/ John B. Wight, Jr.
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John K. Humphress John B. Wight, Jr