SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter:
March 31, 1997 Commission File Number 0-13358
CAPITAL CITY BANK GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2273542
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
217 North Monroe Street, Tallahassee, Florida 32301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(904) 671-0610
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirement for the past 90 days.
Yes __X___ No _____
At April 30, 1997, 5,795,912 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
<TABLE>
CAPITAL CITY BANK GROUP, INC.
I N D E X
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
<S> <C>
Consolidated Statements of Condition --
March 31, 1997 and December 31, 1996 3
Consolidated Statements of Income --
Three Months Ended March 31, 1997
and 1996 4
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1997
and 1996 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Index to Exhibits 16
Signatures 16
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
AS OF MARCH 31, 1997(1) AND DECEMBER 31, 1996
(Dollars In Thousands, Except Per Share Amounts)
<CAPTION>
March 31, December 31,
1997 1996
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Cash and Due From Banks $ 51,336 $ 62,863
Funds Sold 14,815 26,043
Investment Securities Available-for-Sale 190,536 207,189
Loans 693,477 674,675
Unearned Interest (2,247) (2,479)
Allowance for Loan Losses (8,272) (8,179)
Loans, Net 682,958 664,017
Premises and Equipment 33,452 34,006
Accrued Interest Receivable 7,086 6,877
Intangibles 8,091 8,398
Other Assets 11,563 12,006
Total Assets $999,837 $1,021,399
LIABILITIES
Deposits:
Noninterest Bearing Deposits $188,699 $ 196,486
Interest Bearing Deposits 651,367 670,210
Total Deposits 840,066 866,696
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements 33,955 28,697
Other Short-Term Borrowings 6,610 7,260
Long-Term Debt 17,528 18,072
Other Liabilities 9,952 11,174
Total Liabilities 908,111 931,899
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value, 3,000,000
shares authorized; no shares outstanding - -
Common Stock, $.01 par value; 60,000,000 shares
authorized; 5,795,906 issued and outstanding at
March 31, 1997 and 5,778,366 issued and
outstanding at December 31, 1996 58 58
Additional Paid In Capital 5,459 4,934
Retained Earnings 86,598 84,426
Net Unrealized Gain (Loss) on Available-
for-Sale Securities (389) 82
Total Shareholders' Equity 91,726 89,500
Total Liabilities and
Shareholders' Equity $999,837 $1,021,399
Book Value Per Share $ 15.83 $ 15.49
</TABLE>
(1) All share and per share data have been adjusted for a 2-for-1 stock split
effective April 1, 1997.
<PAGE>
<TABLE>
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31(1)
(Dollars in Thousands, Except Per Share Amounts)
<CAPTION>
1997 1996
Unaudited Unaudited
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 15,398 $ 10,675
Investment Securities:
U. S. Treasury 1,028 1,044
U. S. Government Agencies/Corp. 816 1,011
States and Political Subdivisions 832 904
Other Securities 96 69
Funds Sold 259 458
Total Interest Income $ 18,429 $ 14,161
INTEREST EXPENSE
Deposits 6,362 4,770
Federal Funds Purchased & Securities
Sold Under Repurchase Agreements 373 283
Other Short-Term Borrowings 37 12
Long-Term Debt 304 30
Total Interest Expense 7,076 5,095
Net Interest Income 11,353 9,066
Provision for Loan Losses 456 261
Net Interest Income After Provision for
Loan Losses 10,897 8,805
NONINTEREST INCOME
Service Charges on Deposit Accounts 2,013 1,519
Data Processing 800 667
Income from Fiduciary Activities 275 288
Securities Transactions (2) 12
Other 1,364 1,072
Total Noninterest Income 4,450 3,558
NONINTEREST EXPENSE
Salaries and Employee Benefits 5,794 4,785
Occupancy, Net 705 617
Furniture and Equipment 1,285 891
Other 3,017 2,485
Total Noninterest Expense 10,801 8,778
Income Before Income Taxes 4,546 3,585
Income Tax Expense 1,504 1,018
NET INCOME $ 3,042 $ 2,567
Net Income Per Share $ .53 $ .45
Cash Dividends Per Share $ .15 $ .135
Average Shares Outstanding 5,792,292 5,719,960
</TABLE>
(1) All share and per share data have been adjusted for a 2-for-1 stock split
effective April 1, 1997.
<PAGE>
<TABLE>
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31
(Dollars in Thousands)
<CAPTION>
1997 1996
(Unaudited) (Unaudited)
<S> <C> <C>
NET INCOME $ 3,042 $ 2,567
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses 456 261
Depreciation 782 609
Net Amortization (Accretion)-AFS
Securities 117 303
Amortization of Intangible Assets 307 61
Non-Cash Compensation 184 90
Net (Increase) Decrease in Interest
Receivable (209) 27
Net (Increase) Decrease in Other Assets 553 (331)
Net Increase (Decrease) in Other
Liabilities (1,222) (1,814)
Net Cash From Operating Activities 4,010 1,773
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Payments/Maturities of
Investment Securities-AFS 15,954 36,084
Purchase of Investment Securities-AFS - (17,965)
Net (Increase) Decrease in Loans (19,397) (19,124)
Purchase of Premises & Equipment (456) (949)
Sales of Premises & Equipment 228 -
Net Cash from Investing Activities (3,671) (1,954)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in Deposits (26,630) (22,417)
Net Increase (Decrease) in Federal
Funds Purchased 5,258 8,693
Net Increase (Decrease) in Other
Short-Term Borrowings (650) (574)
Repayment of Long-Term Debt (544) (27)
Dividends Paid (869) (3,313)
Issuance of Common Stock 341 186
Net Cash From Financing Activities (23,094) (17,452)
Net Increase (Decrease) in Cash and
Cash Equivalents (22,755) (17,633)
Cash and Cash Equivalents at Beginning of
Period 88,906 103,063
Cash and Cash Equivalents at End of Period $ 66,151 $ 85,430
Supplemental Disclosure:
Interest Paid $ 6,426 $ 6,237
Taxes Paid - -
Transfer of Loans to ORE $ 443 $ 897
</TABLE>
<PAGE>
CAPITAL CITY BANK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) MANAGEMENT'S OPINION AND ACCOUNTING POLICIES
The consolidated financial statements, included herein, have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Prior year financial statements have been reformatted
and/or amounts reclassified, as necessary, to conform with the current
year presentation. All share and per share data have been adjusted to
reflect a 2-for-1 stock split paid effective April 1, 1997.
In the opinion of management, the consolidated financial statements
contain all adjustments, which are those of a recurring nature, and
disclosures necessary to present fairly the financial position of the
Company as of March 31, 1997 and December 31, 1996, and the results of
operations and cash flows for the three month periods ended March 31,
1997 and 1996.
The Company and its subsidiaries follow generally accepted accounting
principles and reporting practices applicable to the banking industry.
The principles which materially affect the financial position, results
of operations and cash flows are set forth in Notes to Consolidated
Financial Statements which are included in the Company's 1996 Annual
Report and Form 10-K. The Company has not significantly changed its
accounting and reporting policies from those disclosed in its 1996
Annual Report on Form 10-K.
(2) INVESTMENT SECURITIES
The carrying value and related market value/amortized cost of
investment securities in the available-for-sale portfolio at March 31,
1997 and December 31, 1996 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
March 31, 1997
Amortized Unrealized Unrealized Market
Available-For-Sale Cost Gains Losses Value
<S> <C> <C> <C> <C>
U. S. Treasury $ 37,223 $ 16 $ 147 $ 37,092
U. S. Government Agencies
and Corporations 50,323 5 682 49,646
States and Political Subdivisions 70,706 345 284 70,767
Mortgage Backed Securities 27,743 279 146 27,876
Other Securities 5,156 2 3 5,155
Total $191,151 $647 $1,262 $190,536
<CAPTION>
December 31, 1996
Amortized Unrealized Unrealized Market
Available For Sale Cost Gains Losses Value
<S> <C> <C> <C> <C>
U. S. Treasury $ 40,766 $ 75 $ 9 $ 40,832
U. S. Government Agencies
and Corporations 57,381 32 376 57,037
States and Political Subdivisions 74,196 620 117 74,699
Mortgage Backed Securities 29,266 160 257 29,169
Other Securities 5,448 4 - 5,452
Total $207,057 $ 891 $ 759 $207,189
</TABLE>
(3) LOANS
The composition of the Company's loan portfolio at March 31, 1997 and
December 31, 1996 was as follows (dollars in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Commercial, Financial
and Agricultural $ 68,493 $ 57,023
Real Estate-Construction 35,612 30,594
Real Estate-Mortgage 452,732 449,905
Consumer 136,640 137,153
Gross Loans $693,477 $674,675
</TABLE>
(4) ALLOWANCE FOR LOAN LOSSES
An analysis of the changes in the allowance for loan losses for the
three month period ended March 31, 1997 and 1996, is as follows
(dollars in thousands):
<TABLE>
<CAPTION>
March 31,
1997 1996
<S> <C> <C>
Balance, Beginning of the Period $8,179 $6,474
Provision for Loan Losses 456 261
Recoveries on Loans Previously
Charged-Off 183 104
Loans Charged-Off (546) (410)
Balance, End of Period $8,272 $6,429
</TABLE>
Impaired loans are primarily defined as all nonaccruing loans for the
loan categories which are included within the scope of SFAS 114.
Selected information pertaining to impaired loans is depicted in the
table below (dollars in thousands):
<TABLE>
<CAPTION>
March 31, 1997
Impaired Loans: Valuation
Balance Allowance
<S> <C> <C>
With Related Credit Allowance $ 141 $ 48
Without Related Credit Allowance 1,429 -
Average Recorded Investment
for the Period 2,131 *
Interest Income:
Recognized $ 24
Collected $ 24
<CAPTION>
March 31, 1996
Impaired Loans: Valuation
Balance Allowance
<S> <C> <C>
With Related Credit Allowance $ 133 $ 19
Without Related Credit Allowance 1,642 -
Average Recorded Investment
for the Period 2,166 *
Interest Income:
Recognized $ 12
Collected $ 7
</TABLE>
* Not Applicable
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.
(5) DEPOSITS
The composition of the Company's interest bearing deposits at March
31, 1997 and December 31, 1996 was as follows (dollars in thousands):
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
<S> <C> <C>
NOW Accounts $103,681 $114,507
Money Market Accounts 79,599 79,352
Savings Deposits 90,191 91,986
Other Time Deposits 377,896 384,365
Total Interest Bearing Deposits $651,367 $670,210
</TABLE>
(6) ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1997, Capital City Bank Group adopted SFAS No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This Statement establishes new rules
for determining whether a transfer of financial assets constitutes a
sale and, if so, the determination of any resulting gain or loss.
This Statement requires that an enterprise recognize only assets it
controls and liabilities it has incurred, to remove assets only when
control has been surrendered, and to remove liabilities only when they
have been extinguished. The Statement will be effective for the
Company's December 31, 1997 financial statements and is not
anticipated to have a material impact on the Company's financial
condition or results of operations.
In February 1997, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards (SFAS) No. 128, "Earnings
per Share" which, when adopted, will replace the current methodology
for calculating and presenting earnings per share. Under SFAS No.
128, primary earnings per share will be replaced with a presentation
of basic earnings per share and fully diluted earnings per share will
be replaced with diluted earnings per share. Basic earnings per share
excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is computed
similarly to fully diluted earnings per share. The Statement will be
effective for the Company's December 31, 1997 financial statements and
is not anticipated to have a material impact on the Company's
financial condition or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion sets forth the major factors that have
affected the Company's financial condition and results of operations
and should be read in conjunction with the accompanying financial
statements. The year-to-date averages used in this report are based
on daily balances for each respective period.
On July 1, 1996, the Company completed its acquisition of First
Financial Bancorp, Inc. and its wholly-owned subsidiary, First Federal
Bank (collectively referred to as "First Financial"). The acquisition
was accounted for as a purchase. Financial comparisons to prior year
periods are not necessarily comparable due to the impact of the
acquisition.
RESULTS OF OPERATIONS
Net Income
Net income was $3.0 million, or $.53 per share for the first quarter
of 1997, a per share increase of 17.8% over the $2.6 million, or $.45
per share for the comparable period in 1996. Operating revenues,
which include net interest income and noninterest income, increased
$3.2 million, or 25.2%, over the first quarter of 1996, and was the
most significant factor contributing to the increase in earnings
(dollars in thousands):
<TABLE>
<CAPTION>
For The Three Months Ended March 31,
1997 1996
<S> <C> <C>
Interest Income $18,429 $14,161
Taxable Equivalent Adjustment(1) 427 461
Interest Income (FTE) 18,856 14,622
Interest Expense 7,076 5,095
Net Interest Income (FTE) 11,780 9,527
Provision for Loan Losses 456 261
Taxable Equivalent Adjustment 427 461
Net Int. Inc. After Provision 10,897 8,805
Noninterest Income 4,450 3,558
Noninterest Expense 10,801 8,778
Income Before Income Taxes 4,546 3,585
Income Taxes 1,504 1,018
Net Income $ 3,042 $ 2,567
Percent Change 18.50% 17.32%
Return on Average Assets (2) 1.23% 1.30%
Return on Average Equity (2) 13.61% 12.59%
</TABLE>
(1) Computed using a statutory tax rate of 35%
(2) Annualized
Net Interest Income
First quarter taxable equivalent net interest income increased $2.3
million, or 23.9%, over the comparable period for 1996. The increase
is attributable to a higher level of earning assets and growth in the
loan portfolio. The acquisition of First Financial contributed
significantly to the Company's growth and increase in net interest
income. Table I on page 14 provides a comparative analysis of the
Company's average balances and interest rates.
Taxable-equivalent interest income increased $4.3 million, or 29.1%,
due to growth in the loan portfolio. Loans, which represent the
Company's highest yielding asset, increased (on average) $226.2
million, or 50.0%, representing 75.7% of total earning assets during
the first quarter of 1997 versus 64.1% for the comparable quarter in
1996. The substantial increase in the loan portfolio reflects the
First Financial acquisition and a reduction in the investment
portfolio. The favorable shift in mix of earning assets contributed
to an increase of 20 basis points in the yield on earning assets which
rose from 8.33% in the first quarter of 1996 to 8.53% in 1996.
Interest expense increased $2.0 million, or 38.9%, due to higher
levels of interest bearing deposits and a shift in deposit mix.
Average deposits increased $166.7 million, or 24.8%, reflecting the
acquisition of First Financial. Certificates of deposit, which
generally represent a higher cost of funds than other deposit
offerings, increased as a percent of average deposits from 38.3% in
the first quarter of 1996 to 45.2% in the first quarter of 1997. This
shift in deposit mix is attributable to the mix of acquired deposits
and led to a 17 basis point increase in the average rate paid on
interest bearing liabilities, which rose from 3.83% in the first
quarter of 1996 to 4.00% in the first quarter of 1997.
The Company's interest rate spread (defined as the average taxable
equivalent yield on earning assets less the average rate paid on
interest bearing liabilities) increased from 4.50% in the first
quarter of 1996 to 4.52% in the comparable quarter for 1997 due to the
higher yield on earning assets. The Company's net interest margin
percentage (defined as taxable-equivalent net interest income divided
by average earning assets) was 5.43% in the first quarter of 1996,
versus 5.32% in the first quarter of 1997. The decrease in the margin
reflects the higher costs of funds.
Provisions for Loan Losses
The provision for loan losses for the three months ended March 31,
1997, was $456,000 versus $261,000 for the first quarter of 1996. Net
charge-offs, while up slightly from 1996, remain at historically low
levels relative to the size of the loan portfolio. Nonperforming
loans declined $400,000, or 13.3%, during the first quarter. As
compared to year-end, the reserve for loan losses increased slightly
to $8.3 million, and represented 1.20% of total loans versus 1.22%.
For a discussion of the Company's nonperforming loans, see the section
entitled "Financial Condition."
Based on current economic conditions, the low level of nonperforming
loans and net charge-offs, it is management's opinion that the
allowance for loan losses as of March 31, 1997, is sufficient to
provide for losses inherent in the portfolio as of that date.
Charge-off activity for the respective periods is set forth below.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Net Charge-Offs $363,000 $306,000
Net Charge-Offs (Annualized) as a percent
of Average Loans Outstanding, Net of
Unearned Interest .20% .28%
</TABLE>
Noninterest Income
Noninterest income increased $892,000, or 25.1%, over the first
quarter of 1996, which included gains in all major categories except
income from fiduciary activities, which was down slightly. Although
the acquisition of First Financial positively impacted noninterest
income, the increase is principally attributable to the implementation
of recommendations resulting from a profit enhancement program
conducted in the latter half of 1995 and repricing of the Bank's
service fees.
Service charges on deposit accounts increased $494,000, or 32.5%. The
increase in the first quarter of 1997, compared to the comparable
quarter in 1996, reflects an increase in the bank service fees which
went into effect on July 1, 1996.
Data processing revenues increased $133,000, or 19.9%, over the first
quarter of 1996. The increase reflects higher processing revenues
associated with both government agencies and third party banks.
Other income increased $292,000, or 27.2%, over the comparable quarter
of 1996. Gains on the sale of real estate loans increased $142,000
due to the acquisition of First Financial. Additionally, check
printing income increased $56,000 and credit life insurance
commissions increased $43,000.
Noninterest income as a percent of average assets was 1.7% for the
first quarter of 1997 versus 1.8% for the comparable quarter in 1996.
Noninterest Expense
Noninterest expense in the first quarter of 1997 increased $2.0
million, or 23.0%, over the first quarter of 1996. The comparison to
first quarter 1996 is substantially impacted by the acquisition of
First Financial. In a linked quarter comparison, noninterest expense
is up $69,000, or .64% versus the fourth quarter 1996.
Compensation expense increased $1.0 million, or 21.1%, over the first
quarter of 1996 reflecting annual raises and an increase in full-time
equivalent employees of 73.
Occupancy expense, including premises, furniture, fixtures and
equipment increased $482,000, or 32.0%. The increase is primarily
attributable to the addition of five new offices through the First
Financial acquisition.
Other noninterest expense increased $532,000, or 21.4%. The increase
was principally attributable to advertising, which was up $131,000, or
102%, and amortization of intangible assets, which was up $165,000, or
271%.
Net noninterest expense (noninterest income minus noninterest expense)
as a percent of average assets was 2.58% in the first quarter of 1997
versus 2.98% for the first quarter of 1996. The Company's efficiency
ratio (noninterest expense expressed as a percent of the sum of
taxable-equivalent net interest income plus noninterest income) was
66.5% in the first quarter 1997 compared to 67.1% for the comparable
quarter in 1996. The reduction in the efficiency ratio is
attributable to growth in operating revenues.
Income Taxes
The provision for income taxes increased $486,000, or 47.7%, over the
first quarter of 1996. The increase in the provision is attributable
to higher taxable income. The Company's effective tax rate for the
first quarter of 1997 was 33.1% compared to 28.4% for the same quarter
in 1996. The increase in the effective tax rate is attributable to a
decrease in tax exempt income as a percent of taxable income in the
first quarter of 1997 as compared to first quarter of 1996.
FINANCIAL CONDITION
Average balances for the first quarter of 1997 reflect the acquisition
of First Financial which was consummated on July 1, 1996. Table I on
page 14 presents average balances for the three months ended March 31,
1997 and 1996.
The Company's average assets increased to $999.8 million in the first
quarter of 1997 from $791.2 million in the first quarter of 1996.
Average earning assets were $896.1 million for the three months ended
March 31, 1997 versus $705.5 million for the comparable quarter of
1996. The most significant change in the mix of earning assets
occurred through growth in the loan portfolio. Average loans were up
$226.2 million, or 50.0%. The increase in the loan portfolio reflects
the First Financial acquisition and a reduction in the investment
portfolio.
The investment portfolio is a significant component of the Company's
operations and, as such, it functions as a key element of liquidity
and asset/liability management. Securities in the Available-for-Sale
portfolio are recorded at fair value and unrealized gains and losses
associated with these securities are recorded, net of tax, as a
separate component of shareholders' equity. At March 31, 1997,
shareholders' equity included a net unrealized loss of $389,000
compared to a gain of $82,000 at December 31, 1996. The reduction in
value reflects the rise in interest rates during the first quarter.
At March 31, 1997, the Company's nonperforming loans were $2.6 million
versus $3.0 million at year-end and $4.6 million at March 31, 1996.
As a percent of nonperforming loans, the allowance for loan losses
represented 323% at March 31, 1997 versus 276% at December 31, 1996
and 183% at March 31, 1996. Nonperforming loans include nonaccruing
and restructured loans. Other real estate, which includes property
acquired either through foreclosure or by receiving a deed in lieu of
foreclosure, was $1.6 million at March 31, 1997, versus $1.5 million
at December 31, 1996, and $1.1 million at March 31, 1996. The ratio
of nonperforming assets as a percent of loans plus other real estate
was .60% at March 31, 1997 compared to .66% at December 31, 1996 and
1.00% at March 31, 1996.
Average deposits increased 24.8% from $673.2 million in the first
quarter of 1996, to $840.0 million in the first quarter of 1997. The
growth in deposits is attributable to the acquisition of First
Financial. At the time of acquisition, certificates of deposit
constituted 75% of the acquired deposits. As a result, the Company
experienced a significant shift in its deposit mix. During the first
quarter, certificates of deposit represented 45.2% of total deposits
compared to 38.3% for the comparable quarter in 1996. This shift in
mix has contributed to a compression in the Company's net interest
margin which averaged 5.32% in the first quarter of 1997 versus 5.43%
in 1996.
The ratio of average noninterest bearing deposits to total deposits
was 21.3% for the first quarter of 1997 compared to 24.5% for the
first quarter of 1996. For the same periods, the ratio of average
interest bearing liabilities to average earning assets was 80.0% and
75.9%, respectively. The change in both ratios is primarily
attributable to the acquisition of First Financial.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity, for a financial institution, is the availability of funds
to meet increased loan demand and/or excessive deposit withdrawals.
Management has implemented a financial structure that provides ready
access to sufficient liquid funds to meet normal transaction
requirements, take advantage of investment opportunities and cover
unforeseen liquidity demands. In addition to core deposit growth,
sources of funds available to meet liquidity demands for the
subsidiary banks include federal funds sold, near-term loan
maturities, securities held in the available-for-sale portfolio, and
the ability to purchase federal funds through established lines of
credit with correspondent banks. Additionally, the parent company
maintains a $25.0 million revolving line of credit. As of March 31,
1997, there was $14.5 million outstanding under this facility. On
July 1, 1996, the Company borrowed $15.0 million to fund the
acquisition of First Financial Bancorp. During the first quarter of
1997, principal reductions on the line of credit totaled $500,000.
The Company's equity capital was $91.7 million as of March 31, 1997
compared to $89.5 million as of December 31, 1996. Management
continues to monitor its capital position in relation to its level of
assets with the objective of maintaining a strong capital position.
The leverage ratio was 8.36% at March 31, 1997 compared to 7.87% at
December 31, 1996. Further, the Company's risk-adjusted capital ratio
of 13.73% at March 31, 1997, significantly exceeds the 8.0% minimum
requirement under the risk-based regulatory guidelines.
State and federal regulations as well as the Company's long-term debt
agreements place certain restrictions on the payment of dividends by
both the Company and its Group banks. At March 31, 1997, these
regulations and covenants did not impair the Company's (or its Group
banks') ability to declare and pay dividends or to meet other existing
obligations in the normal course of business.
During the first three months of 1997, shareholders' equity increased
$2.2 million, or 9.9%, on an annualized basis. Growth in equity
during the first quarter was adversely impacted by a reduction of
$471,000 in the Company's net unrealized gain on available-for-sale
securities, which declined from an $82,000 gain at December 31, 1996
to a $389,000 loss at March 31, 1997. The loss in value reflects the
rise in interest rates which occurred primarily during March 1997.
Additionally, shareholders' equity reflects the declaration and
payment of dividends totaling $869,000 ($.15 per share) during the
first quarter.
At March 31, 1997, the Company's common stock had a book value of
$15.83 per share compared to $15.49 at December 31, 1996. Pursuant to
the Company's stock repurchase program adopted in 1989, the Company
has repurchased 527,160 shares (split adjusted) of its common stock.
No shares have been repurchased in 1997. During the first quarter,
the Company issued 17,540 shares under its performance incentive and
stock purchase plans.
IMPACT OF ACCOUNTING STANDARDS
Effective January 1, 1997, Capital City Bank Group adopted SFAS No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This Statement establishes new rules
for determining whether a transfer of financial assets constitutes a
sale and, if so, the determination of any resulting gain or loss.
This Statement requires that an enterprise recognize only assets it
controls and liabilities it has incurred, to remove assets only when
control has been surrendered, and to remove liabilities only when they
have been extinguished.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share" which, when adopted, will replace the
current methodology for calculating and presenting earnings per share.
The Statement will be effective for the Company's December 31, 1997
financial statements.
Neither statement has a material impact on the Company's financial
condition or results of operations.
<TABLE>
TABLE I
AVERAGES BALANCES & INTEREST RATES
(Taxable Equivalent Basis - Dollars in Thousands)
<CAPTION>
For Three Months Ended March 31, 1997
Average Average
Balance Interest Rate
ASSETS
<S> <C> <C> <C>
Loans, Net of Unearned Interest $678,730 $15,438 9.22%
Taxable Investment Securities 124,657 1,940 6.30%
Tax-Exempt Investment Securities 72,250 1,219 6.75%
Funds Sold 20,493 259 5.11%
Total Earning Assets 896,130 18,856 8.53%
Cash & Due From Banks 50,180
Allowance for Loan Losses (8,275)
Other Assets 61,802
TOTAL ASSETS $999,837
LIABILITIES
NOW Accounts $110,072 506 1.86%
Money Market Accounts 79,882 579 2.94%
Savings Accounts 91,236 451 2.00%
Other Time Deposits 379,585 4,826 5.16%
Total Interest Bearing Deposits 660,775 6,362 3.90%
Funds Purchased 31,779 373 4.76%
Other Short-Term Borrowings 6,281 37 2.36%
Long-Term Debt 18,031 304 6.84%
Total Int. Bearing Liabilities 716,866 7,076 4.00%
Noninterest Bearing Deposits 179,184
Other Liabilities 13,166
TOTAL LIABILITIES 909,216
SHAREHOLDERS' EQUITY
Common Stock 58
Surplus 5,301
Retained Earnings 85,262
TOTAL SHAREHOLDERS' EQUITY 90,621
TOTAL LIABILITIES & EQUITY $999,837
Net Interest Rate Spread 4.52%
Net Interest Income $11,780
Net Interest Margin 5.32%
<CAPTION>
For Three Months Ended March 31, 1996
Average Average
Balance Interest Rate
ASSETS
<S> <C> <C> <C>
Loans, Net of Unearned Interest $452,579 $10,712 9.52%
Taxable Investment Securities 142,307 2,124 6.00%
Tax-Exempt Investment Securities 76,053 1,329 6.99%
Funds Sold 34,578 458 5.33%
Total Earning Assets 705,517 14,623 8.33%
Cash & Due From Banks 49,772
Allowance for Loan Losses (6,506)
Other Assets 42,411
TOTAL ASSETS $791,194
LIABILITIES
NOW Accounts $ 99,117 $ 432 1.75%
Money Market Accounts 72,217 524 2.92%
Savings Accounts 79,219 407 2.07%
Other Time Deposits 257,485 3,407 5.32%
Total Interest Bearing Deposits 508,038 4,770 3.78%
Funds Purchased 23,986 283 4.75%
Other Short-Term Borrowings 1,310 12 3.68%
Long-Term Debt 1,927 30 6.26%
Total Int. Bearing Liabilities 535,261 5,095 3.83%
Noninterest Bearing Deposits 165,193
Other Liabilities 8,737
TOTAL LIABILITIES 709,191
SHAREHOLDERS' EQUITY
Common Stock 62
Surplus 5,842
Retained Earnings 76,099
TOTAL SHAREHOLDERS' EQUITY 82,003
TOTAL LIABILITIES & EQUITY $791,194
Net Interest Rate Spread 4.50%
Net Interest Income $9,528
Net Interest Margin 5.43%
</TABLE>
(1) Average balances include nonaccrual loans. Interest income includes
fees on loans of approximately $705,000 and $476,000, for the three
months ended March 31, 1997 and 1996, respectively.
(2) Interest income includes the effects of taxable equivalent adjustments
using a 35% tax rate.
PART II. OTHER INFORMATION
Items 1-5.
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
Not applicable
(B) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the period
ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf
by the undersigned Chief Financial Officer hereunto duly authorized.
CAPITAL CITY BANK GROUP, INC.
(Registrant)
J. Kimbrough Davis
Senior Vice President and
Chief Financial Officer
Date: May 13, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000726601
<NAME> CAPITAL CITY BANK GROUP, INC.
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
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<CASH> 51336
<INT-BEARING-DEPOSITS> 3915
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<ALLOWANCE> (8272)
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0
0
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<EPS-PRIMARY> .53
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<YIELD-ACTUAL> 5.32
<LOANS-NON> 2303
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</TABLE>
