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Section 1: 10-Q (FORM 10-Q)

UNITED STATES

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-Q

 

[x]           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended June 30, 2019

 

OR

 

[  ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission File Number: 0-13358 

CCB Group logo 

(Exact name of registrant as specified in its charter)

 

Florida

 

59-2273542

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

217 North Monroe Street, Tallahassee, Florida

 

32301

(Address of principal executive office)

 

(Zip Code)

 

(850) 402-7821

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par value $0.01

CCBG

Nasdaq Stock Market, LLC

 

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 such 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ]

Accelerated filer [X]

Non-accelerated filer [  ]

Smaller reporting company [  ]

 

 

(Do not check if smaller reporting company)

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of The Exchange Act.  [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

At July 31, 2019, 16,745,866 shares of the Registrant's Common Stock, $.01 par value, were outstanding.

 

 


 

CAPITAL CITY BANK GROUP, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2019

TABLE OF CONTENTS

 

PART I – Financial Information

 

Page

 

Item 1.

Consolidated Financial Statements (Unaudited)

 

 

Consolidated Statements of Financial Condition – June 30, 2019 and December 31, 2018

4

 

Consolidated Statements of Income – Three and Six Months Ended June 30, 2019 and 2018

5

 

Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2019 and 2018

6

 

Consolidated Statements of Changes in Shareowners’ Equity – Three and Six Months Ended June 30, 2019 and 2018

7

 

Consolidated Statements of Cash Flows – Six Months Ended June 30, 2019 and 2018

8

 

Notes to Consolidated Financial Statements

9

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

29

 

 

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

45

 

 

 

Item 4.

Controls and Procedures

45

 

 

 

PART II – Other Information

 

 

 

Item 1.

Legal Proceedings

45

 

 

 

Item 1A.

Risk Factors

45

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

46

 

 

 

Item 4.

Mine Safety Disclosure

46

 

 

 

Item 5.

Other Information

46

 

 

 

Item 6.

Exhibits

47

 

 

 

Signatures

 

48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

           

2 


 

INTRODUCTORY NOTE

Caution Concerning Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control.  The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements.

 

All forward-looking statements, by their nature, are subject to risks and uncertainties.  Our actual future results may differ materially from those set forth in our forward-looking statements.

 

Our ability to achieve our financial objectives could be adversely affected by the factors discussed in detail in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and the following sections of our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”): (a) “Introductory Note” in Part I, Item 1. “Business”; (b) “Risk Factors” in Part I, Item 1A, as updated in our subsequent quarterly reports filed on Form 10-Q; and (c) “Introduction” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Part II, Item 7, as well as:

·          our ability to successfully manage interest rate risk, liquidity risk, and other risks inherent to our industry;

·          legislative or regulatory changes;

·          the effects of security breaches and computer viruses that may affect our computer systems or fraud related to debit card products;

·          the accuracy of our financial statement estimates and assumptions, including the estimates used for our loan loss reserve, deferred tax asset valuation and pension plan;

·          changes in accounting principles, policies, practices or guidelines, including the effects of forthcoming Current Expected Credit Losses (“CECL”) accounting implementation;

·          the frequency and magnitude of foreclosure of our loans;

·          the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations;

·          the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

·          our ability to declare and pay dividends, the payment of which is subject to our capital requirements;

·          changes in the securities and real estate markets;

·          changes in monetary and fiscal policies of the U.S. Government;

·          inflation, interest rate, market and monetary fluctuations;

·          the effects of harsh weather conditions, including hurricanes, and man-made disasters;

·          our ability to comply with the extensive laws and regulations to which we are subject, including the laws for each jurisdiction where we operate;

·          the willingness of clients to accept third-party products and services rather than our products and services and vice versa;

·          increased competition and its effect on pricing;

·          technological changes;

·          negative publicity and the impact on our reputation;

·          changes in consumer spending and saving habits;

·          growth and profitability of our noninterest income;

·          the limited trading activity of our common stock;

·          the concentration of ownership of our common stock;

·          anti-takeover provisions under federal and state law as well as our Articles of Incorporation and our Bylaws;

·          other risks described from time to time in our filings with the Securities and Exchange Commission; and

·          our ability to manage the risks involved in the foregoing.

 

However, other factors besides those listed in Item 1A Risk Factors or discussed in this Form 10-Q also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties.  Any forward-looking statements made by us or on our behalf speak only as of the date they are made.  We do not undertake to update any forward-looking statement, except as required by applicable law.

3 


 

PART I.      FINANCIAL INFORMATION

Item 1.

 

 

 

 

 

 

 

 

CAPITAL CITY BANK GROUP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

June 30,

 

December 31,

(Dollars in Thousands)

2019

 

2018

ASSETS

 

 

 

 

 

Cash and Due From Banks

$

53,731

 

$

62,032

Federal Funds Sold and Interest Bearing Deposits

 

234,097

 

 

213,968

 

 

Total Cash and Cash Equivalents

 

287,828

 

 

276,000

 

 

 

 

 

 

 

 

Investment Securities, Available for Sale, at fair value

 

410,851

 

 

446,157

Investment Securities, Held to Maturity, at amortized cost (fair value of $230,690 and $214,413)

 

229,516

 

 

217,320

 

 

Total Investment Securities

 

640,367

 

 

663,477

 

 

 

 

 

 

 

 

Loans Held For Sale

 

9,885

 

 

6,869

 

 

 

 

 

 

 

 

Loans, Net of Unearned Income

 

1,835,182

 

 

1,774,225

 

Allowance for Loan Losses

 

(14,593)

 

 

(14,210)

 

 

Loans, Net

 

1,820,589

 

 

1,760,015

 

 

 

 

 

 

 

 

Premises and Equipment, net

 

86,005

 

 

87,190

Goodwill

 

84,811

 

 

84,811

Other Real Estate Owned

 

1,010

 

 

2,229

Other Assets

 

87,159

 

 

78,592

 

 

Total Assets

$

3,017,654

 

$

2,959,183

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest Bearing Deposits

$

1,024,898

 

$

947,858

 

Interest Bearing Deposits

 

1,536,206

 

 

1,583,998

 

 

Total Deposits

 

2,561,104

 

 

2,531,856

 

 

 

 

 

 

 

 

Short-Term Borrowings

 

9,753

 

 

13,541

Subordinated Notes Payable

 

52,887

 

 

52,887

Other Long-Term Borrowings

 

7,313

 

 

8,568

Other Liabilities

 

72,002

 

 

49,744

 

 

Total Liabilities

 

2,703,059

 

 

2,656,596

 

 

 

 

 

 

 

 

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; 16,745,866 and 16,747,571 shares

 

 

 

 

issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

167

 

 

167

Additional Paid-In Capital

 

30,751

 

 

31,058

Retained Earnings

 

310,247

 

 

300,177

Accumulated Other Comprehensive Loss, net of tax

 

(26,570)

 

 

(28,815)

Total Shareowners’ Equity

 

314,595

 

 

302,587

Total Liabilities and Shareowners' Equity

$

3,017,654

 

$

2,959,183

 

 

 

 

 

 

 

 

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

4 


 

CAPITAL CITY BANK GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

(Dollars in Thousands, Except Per Share Data)

2019

 

2018

 

2019

 

2018

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

Loans, including Fees

$

23,765

 

$

20,533

 

$

46,381

 

$

40,068

Investment Securities:

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

3,301

 

 

2,944

 

 

6,688

 

 

5,467

 

Tax Exempt

 

92

 

 

212

 

 

218

 

 

451

Federal Funds Sold and Interest Bearing Deposits

 

1,507

 

 

730

 

 

3,100

 

 

1,647

Total Interest Income

 

28,665

 

 

24,419

 

 

56,387

 

 

47,633

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

1,988

 

 

995

 

 

4,087

 

 

1,863

Short-Term Borrowings

 

31

 

 

8

 

 

66

 

 

16

Subordinated Notes Payable

 

596

 

 

552

 

 

1,204

 

 

1,027

Other Long-Term Borrowings

 

66

 

 

94

 

 

138

 

 

194

Total Interest Expense

 

2,681

 

 

1,649

 

 

5,495

 

 

3,100

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME

 

25,984

 

 

22,770

 

 

50,892

 

 

44,533

Provision for Loan Losses

 

646

 

 

815

 

 

1,413

 

 

1,560

Net Interest Income After Provision For Loan Losses

 

25,338

 

 

21,955

 

 

49,479

 

 

42,973

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

Deposit Fees

 

4,756

 

 

4,842

 

 

9,531

 

 

9,714

Bank Card Fees

 

3,036

 

 

2,909

 

 

5,891

 

 

5,720

Wealth Management Fees

 

2,404

 

 

2,037

 

 

4,727

 

 

4,210

Mortgage Banking Fees

 

1,199

 

 

1,206

 

 

2,192

 

 

2,263

Other

 

1,375

 

 

1,548

 

 

2,981

 

 

3,112

Total Noninterest Income

 

12,770

 

 

12,542

 

 

25,322

 

 

25,019

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

Compensation

 

16,437

 

 

15,797

 

 

32,786

 

 

31,708

Occupancy, net

 

4,537

 

 

4,503

 

 

9,046

 

 

9,054

Other Real Estate Owned, net

 

75

 

 

248

 

 

438

 

 

874

Other

 

7,347

 

 

7,845

 

 

14,324

 

 

14,663

Total Noninterest Expense

 

28,396

 

 

28,393

 

 

56,594

 

 

56,299

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

9,712

 

 

6,104

 

 

18,207

 

 

11,693

Income Tax Expense (Benefit)

 

2,387

 

 

101

 

 

4,446

 

 

(83)

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

$

7,325

 

$

6,003

 

$

13,761

 

$

11,776

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC NET INCOME PER SHARE

$

0.44

 

$

0.35

 

$

0.82

 

$

0.69

DILUTED NET INCOME PER SHARE

$

0.44

 

$

0.35

 

$

0.82

 

$

0.69

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Common Basic Shares Outstanding

 

16,791

 

 

17,045

 

 

16,791

 

 

17,037

Average Common Diluted Shares Outstanding

 

16,818

 

 

17,104

 

 

16,820

 

 

17,089

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

5 


 

CAPITAL CITY BANK GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 (Unaudited) 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

(Dollars in Thousands)

2019

 

2018

 

2019

 

2018

NET INCOME

$

7,325

 

$

6,003

 

$

13,761

 

$

11,776

Other comprehensive income, before tax:

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized gain/loss on securities available for sale

 

1,736

 

 

(265)

 

 

2,985

 

 

(1,752)

Amortization of unrealized losses on securities transferred from

 

 

 

 

 

 

 

 

 

 

 

available for sale to held to maturity

 

11

 

 

14

 

 

22

 

 

28

Total Investment Securities

 

1,747

 

 

(251)

 

 

3,007

 

 

(1,724)

Other comprehensive income (loss), before tax

 

1,747

 

 

(251)

 

 

3,007

 

 

(1,724)

Deferred tax expense (benefit) related to other comprehensive income

 

443

 

 

(63)

 

 

762

 

 

(436)

Other comprehensive income (loss), net of tax

 

1,304

 

 

(188)

 

 

2,245

 

 

(1,288)

TOTAL COMPREHENSIVE INCOME

$

8,629

 

$

5,815

 

$

16,006

 

10,488

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

6 


 

CAPITAL CITY BANK GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Other 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Comprehensive

 

 

 

(Dollars In Thousands,

Shares

Common

 

 

Paid-In

 

Retained

 

(Loss) Income,

 

 

 

Except Share Data)

Outstanding

Stock

 

 

Capital

 

Earnings

 

Net of Taxes

 

Total

Three Months Ended:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 1, 2019

16,812,460

 

$

168

 

$

31,929

 

$

304,763

 

$

(27,874)

 

$

308,986

Net Income

-

 

 

-

 

 

-

 

 

7,325

 

 

-

 

 

7,325

Other Comprehensive Income, net of tax

-

 

 

-

 

 

-

 

 

-

 

 

1,304

 

 

1,304

Cash Dividends ($0.1100 per share)

-

 

 

-

 

 

-

 

 

(1,841)

 

 

-

 

 

(1,841)

Repurchase of Common Stock

(77,000)

 

 

(1)

 

 

(1,805)

 

 

-

 

 

-

 

 

(1,806)

Stock Based Compensation

-

 

 

-

 

 

386

 

 

-

 

 

-

 

 

386

Impact of Transactions Under

  Compensation Plans, net

10,406

 

 

-

 

 

241

 

 

-

 

 

-

 

 

241

Balance, June 30, 2019

16,745,866

 

$

167

 

$

30,751

 

$

310,247

 

$

(26,570)

 

$

314,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, April 1, 2018

17,044,066

 

$

171

 

$

37,343

 

$

283,990

 

$

(33,144)

 

$

288,360

Net Income

-

 

 

-

 

 

-

 

 

6,003

 

 

-

 

 

6,003

Other Comprehensive Loss, net of tax

-

 

 

-

 

 

-

 

 

-

 

 

(188)

 

 

(188)

Cash Dividends ($0.0700 per share)

-

 

 

-

 

 

-

 

 

(1,193)

 

 

-

 

 

(1,193)

Stock Based Compensation

-

 

 

-

 

 

324

 

 

-

 

 

-

 

 

324

Impact of Transactions Under

  Compensation Plans, net

11,598

 

 

-

 

 

265

 

 

-

 

 

-

 

 

265

Balance, June 30, 2018

17,055,664

 

$

171

 

$

37,932

 

$

288,800

 

$

(33,332)

 

$

293,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Other 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Comprehensive

 

 

 

(Dollars In Thousands,

Shares

 

Common

 

 

Paid-In

 

Retained

 

(Loss) Income,

 

 

 

Except Share Data)

Outstanding

 

Stock

 

 

Capital

 

Earnings

 

Net of Taxes

 

Total

Six Months Ended:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2019

16,747,571

 

$

167

 

$

31,058

 

$

300,177

 

$

(28,815)

 

$

302,587

Net Income

-

 

 

-

 

 

-

 

 

13,761

 

 

-

 

 

13,761

Other Comprehensive Income, net of tax

-

 

 

-

 

 

-

 

 

-

 

 

2,245

 

 

2,245

Cash Dividends ($0.2200 per share)

-

 

 

-

 

 

-

 

 

(3,691)

 

 

-

 

 

(3,691)

Repurchase of Common Stock

(77,000)

 

 

(1)

 

 

(1,805)

 

 

-

 

 

-

 

 

(1,806)

Stock Based Compensation

-

 

 

-

 

 

885

 

 

-

 

 

-

 

 

885

Impact of Transactions Under

  Compensation Plans, net

75,295

 

 

1

 

 

613

 

 

-

 

 

-

 

 

614

Balance, June 30, 2019

16,745,866

 

$

167

 

$

30,751

 

$

310,247

 

$

(26,570)

 

$

314,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2018

16,988,951

 

$

170

 

$

36,674

 

$

279,410

 

$

(32,044)

 

$

284,210

Net Income

-

 

 

-

 

 

-

 

 

11,776

 

 

-

 

 

11,776

Other Comprehensive Loss, net of tax

-

 

 

-

 

 

-

 

 

-

 

 

(1,288)

 

 

(1,288)

Cash Dividends ($0.1400 per share)

-

 

 

-

 

 

-

 

 

(2,386)

 

 

-

 

 

(2,386)

Stock Based Compensation

-

 

 

-

 

 

655

 

 

-

 

 

-

 

 

655

Impact of Transactions Under

  Compensation Plans, net

66,713

 

 

1

 

 

603

 

 

-

 

 

-

 

 

604

Balance, June 30, 2018

17,055,664

 

$

171

 

$

37,932

 

$

288,800

 

$

(33,332)

 

$

293,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

7 


 

CAPITAL CITY BANK GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited) 

 

 

 

 

 

 

 

Six Months Ended June 30,

(Dollars in Thousands)

2019

 

2018

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net Income

$

13,761

 

$

11,776

Adjustments to Reconcile Net Income to

 

 

 

 

 

   Cash Provided by Operating Activities:

 

 

 

 

 

      Provision for Loan Losses

 

1,413

 

 

1,560

      Depreciation

 

3,148

 

 

3,218

      Amortization of Premiums, Discounts and Fees, net

 

2,520

 

 

3,495

      Originations of Loans Held-for-Sale

 

(94,776)

 

 

(87,689)

      Proceeds From Sales of Loans Held-for-Sale

 

93,952

 

 

86,523

      Net Gain From Sales of Loans Held-for-Sale

 

(2,192)

 

 

(2,263)

      Stock Compensation

 

885

 

 

655

      Net Tax Benefit From Stock-Based Compensation

 

(14)

 

 

(41)

      Deferred Income Taxes

 

1,253

 

 

2,156

      Net Change in Operating Leases

 

45

 

 

-

      Net Loss on Sales and Write-Downs of Other Real Estate Owned

 

204

 

 

693

      Proceeds From Insurance Claim for Operating Loss

 

268

 

 

-

      Loss on Disposal of Premises and Equipment

 

39

 

 

-

      Net (Increase) Decrease in Other Assets

 

(11,628)

 

 

541

      Net Increase (Decrease) in Other Liabilities

 

22,430

 

 

(15,468)

Net Cash Provided By Operating Activities

 

31,308

 

 

5,156

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Securities Held to Maturity:

 

 

 

 

 

      Purchases

 

(33,844)

 

 

(84,617)

      Payments, Maturities, and Calls

 

20,891

 

 

63,724

Securities Available for Sale:

 

 

 

 

 

      Purchases

 

(31,215)

 

 

(102,974)

      Payments, Maturities, and Calls

 

67,551

 

 

84,991

Purchases of Loans Held for Investment

 

(18,661)

 

 

(16,106)

Net Increase in Loans

 

(43,822)

 

 

(56,981)

Proceeds from Insurance Claims on Premises

 

814

 

 

-

Proceeds From Sales of Other Real Estate Owned

 

1,703

 

 

715

Purchases of Premises and Equipment

 

(2,002)

 

 

(1,520)

Net Cash Used In Investing Activities

 

(38,585)

 

 

(112,768)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Net Increase (Decrease) in Deposits

 

29,248

 

 

(10,687)

Net Decrease in Short-Term Borrowings

 

(4,148)

 

 

(459)

Repayment of Other Long-Term Borrowings

 

(895)

 

 

(1,070)

Dividends Paid

 

(3,691)

 

 

(2,386)

Payments to Repurchase Common Stock

 

(1,806)

 

 

-

Issuance of Common Stock Under Compensation Plans

 

397

 

 

411

Net Cash Provided By (Used In) Financing Activities

 

19,105

 

 

(14,191)

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

11,828

 

 

(121,803)

 

 

 

 

 

 

Cash and Cash Equivalents at Beginning of Period

 

276,000

 

 

285,442

Cash and Cash Equivalents at End of Period

$

287,828

 

$

163,639

 

 

 

 

 

 

Supplemental Cash Flow Disclosures:

 

 

 

 

 

   Interest Paid

$

5,505

 

$

3,103

   Income Taxes Paid

$

1,381

 

$

101

 

 

 

 

 

 

Noncash Investing and Financing Activities:

 

 

 

 

 

   Loans Transferred to Other Real Estate Owned

$

688

 

$

840

   Right-of-Use Assets Obtained in Exchange for Operating Lease Liabilities(1)

$

1,992

 

$

-

 

 

 

 

 

 

(1)Initial amount recorded upon implementation on January 1, 2019.

 

 

 

 

 

 

 

 

 

 

 

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

 

8 


 

CAPITAL CITY BANK GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 -  SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations.  Capital City Bank Group, Inc. (“CCBG” or the “Company”) provides a full range of banking and banking-related services to individual and corporate clients through its subsidiary, Capital City Bank, with banking offices located in Florida, Georgia, and Alabama.  The Company is subject to competition from other financial institutions, is subject to regulation by certain government agencies and undergoes periodic examinations by those regulatory authorities.

 

Basis of Presentation.  The consolidated financial statements in this Quarterly Report on Form 10-Q include the accounts of CCBG and its wholly owned subsidiary, Capital City Bank (“CCB” or the “Bank”).  All material inter-company transactions and accounts have been eliminated.  Certain previously reported amounts have been reclassified to conform to the current year’s presentation.

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. 

 

The consolidated statement of financial condition at December 31, 2018 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2018.

 

Accounting Changes

 

Leases.   Accounting Standards Update ("ASU") 2016-02 requires that lessees and lessors recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements.  ASU 2016-02 was effective for the Company on January 1, 2019.  ASU 2016-02 provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at the beginning of either the earliest period presented or as of the beginning of the period of adoption with the option to elect certain practical expedients.  The Company elected to apply the modified retrospective transition approach as of the beginning of the period of adoption and has not restated comparative periods.  The Company also adopted the package of practical expedients provided under ASU 2016-02, which provided for the Company not to reassess: (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, and (iii) initial and direct costs of any existing leases.  The Company elected not to apply the recognition requirements of ASU 2016-02 to any short-term leases (as defined by the accounting guidance). 

 

The Company’s operating leases related primarily to banking office locations.  As a result of implementing ASU 2016-02, the Company recognized operating lease right-of-use (“ROU”) assets of $2.0 million and operating lease liabilities of $2.8 million on January 1, 2019, with no significant impact on its consolidated statement of income or consolidated statement of cash flows compared to the prior lease accounting model.  The difference between the lease assets and the lease liabilities of $0.8 million was prepaid rent, which was reclassified to lease assets.  The ROU asset and lease liability are recorded in other assets and other liabilities, respectively, in the consolidated statement of financial condition.  See Note 5 – Leases for additional information.

 

9 


 

NOTE 2 – INVESTMENT SECURITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Portfolio Composition. The amortized cost and related market value of investment securities available-for-sale and

held-to-maturity were as follows:

 

June 30, 2019

 

 

December 31, 2018

 

Amortized

Unrealized

Unrealized

Market

Amortized

Unrealized

Unrealized

Market

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gain

 

Losses

 

Value

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Treasury

$

241,731

 

$

908

 

$

616

 

$

242,023

 

$

264,298

 

$

167

 

$

2,616

 

$

261,849

U.S. Government Agency

 

138,046

 

 

476

 

 

395

 

 

138,127

 

 

133,201

 

 

520

 

 

515

 

 

133,206

States and Political Subdivisions

 

22,067

 

 

8

 

 

9

 

 

22,066

 

 

42,509

 

 

-

 

 

144

 

 

42,365

Mortgage-Backed Securities

 

723

 

 

65

 

 

-

 

 

788

 

 

903

 

 

40

 

 

-

 

 

943

Equity Securities(1)

 

7,847

 

 

-

 

 

-

 

 

7,847

 

 

7,794

 

 

-

 

 

-

 

 

7,794

Total

$

410,414

 

$

1,457

 

$

1,020

 

$

410,851

 

$

448,705

 

$

727

 

$

3,275

 

$

446,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Treasury

$

35,062

 

$

7

 

$

96

 

$

34,973

 

$

35,088

 

$

-

 

$

477

 

$

34,611

States and Political Subdivisions

 

4,833

 

 

1

 

 

3

 

 

4,831

 

 

6,512

 

 

-

 

 

26

 

 

6,486

Mortgage-Backed Securities

 

189,621

 

 

1,614

 

 

349

 

 

190,886

 

 

175,720

 

 

220

 

 

2,624

 

 

173,316

Total

$

229,516

 

$

1,622

 

$

448

 

$

230,690

 

$

217,320

 

$

220

 

$

3,127

 

$

214,413

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Investment Securities

$

639,930

 

$

3,079

 

$

1,468

 

$

641,541

 

$

666,025

 

$

947

 

$

6,402

 

$

660,570

 

(1)     Includes Federal Home Loan Bank and Federal Reserve Bank stock, recorded at cost of $3.1 million, $4.8 million, respectively, at June 30, 2019 and includes Federal Home Loan Bank and Federal Reserve Bank stock recorded at cost of $3.0 million and $4.8 million, respectively, at December 31, 2018.

 

Securities with an amortized cost of $309.3 million and $319.6 million at June 30, 2019 and December 31, 2018, respectively, were pledged to secure public deposits and for other purposes.

 

The Bank, as a member of the Federal Home Loan Bank of Atlanta (“FHLB”), is required to own capital stock in the FHLB based generally upon the balances of residential and commercial real estate loans and FHLB advances.  FHLB stock, which is included in equity securities, is pledged to secure FHLB advances.  No ready market exists for this stock, and it has no quoted market value; however, redemption of this stock has historically been at par value.

 

As a member of the Federal Reserve Bank of Atlanta, the Bank is required to maintain stock in the Federal Reserve Bank of Atlanta based on a specified ratio relative to the Bank’s capital.  Federal Reserve Bank stock is carried at cost.

 

Maturity Distribution.  At June 30, 2019, the Company's investment securities had the following maturity distribution based on contractual maturity.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations.  Mortgage-backed securities and certain amortizing U.S. government agency securities are shown separately because they are not due at a certain maturity date.

 

 

Available for Sale

 

Held to Maturity

(Dollars in Thousands)

Amortized Cost

 

Market Value

 

Amortized Cost

 

Market Value

Due in one year or less

$

148,151

 

$

147,738

 

$

19,840

 

$

19,800

Due after one year through five years

 

130,952

 

 

131,635

 

 

20,055

 

 

20,004

Mortgage-Backed Securities

 

723

 

 

788

 

 

189,621

 

 

190,886

U.S. Government Agency

 

122,741

 

 

122,843

 

 

-

 

 

-

Equity Securities

 

7,847

 

 

7,847

 

 

-

 

 

-

Total

$

410,414

 

$

410,851

 

$

229,516

 

$

230,690

10 


 

Unrealized Losses on Investment Securities.   The following table summarizes the investment securities with unrealized losses aggregated by major security type and length of time in a continuous unrealized loss position:

 

 

Less Than

 

Greater Than

 

 

 

 

 

 

 

12 Months

 

12 Months

 

Total

 

Market

 

Unrealized

 

Market

 

Unrealized

 

Market

 

Unrealized

(Dollars in Thousands)

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Treasury

$

-

 

$

-

 

$

167,884

 

$

616

 

$

167,884

 

$

616

U.S. Government Agency

 

32,600

 

 

175

 

 

42,908

 

 

220

 

 

75,508

 

 

395

States and Political Subdivisions

 

-

 

 

-

 

 

11,369

 

 

9

 

 

11,369

 

 

9

Total

 

32,600

 

 

175

 

 

222,161

 

 

845

 

 

254,761

 

 

1,020

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Treasury

 

-

 

 

-

 

  

29,958

 

 

96

 

  

29,958

 

 

96

States and Political Subdivisions

 

-

 

 

-

 

 

2,880

 

 

3

 

 

2,880

 

 

3

Mortgage-Backed Securities

 

4,929

 

 

32

 

 

47,910

 

 

317

 

 

52,839

 

 

349

Total

$

4,929

 

$

32

 

$

80,748

 

$

416

 

$

85,677

 

$

448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Treasury

$

28,420

 

$

80

 

$

193,501

 

$

2,536

 

$

221,921

 

$

2,616

U.S. Government Agency

 

53,237

 

 

271

 

 

28,735

 

 

244

 

 

81,972

 

 

515

States and Political Subdivisions

 

8,243

 

 

12

 

 

31,417

 

 

132

 

 

39,660

 

 

144

Mortgage-Backed Securities

 

10

 

 

-

 

 

-

 

 

-

 

 

10

 

 

-

Total

 

89,910

 

 

363

 

 

253,653

 

 

2,912

 

 

343,563

 

 

3,275

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Treasury

 

-

 

 

-

 

 

34,612

 

 

477

 

 

34,612

 

 

477

States and Political Subdivisions

 

204

 

 

-

 

 

6,281

 

 

26

 

 

6,485

 

 

26

Mortgage-Backed Securities

 

51,327

 

 

389

 

 

84,705

 

 

2,235

 

 

136,032

 

 

2,624

Total

$

51,531

 

$

389

 

$

125,598

 

$

2,738

 

$

177,129

 

$

3,127

 

Management evaluates securities for other than temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation.  Declines in the fair value of  available-for-sale (“AFS”) and held-to-maturity (“HTM”) securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, the Company considers, (i) whether it has decided to sell the security, (ii) whether it is more likely than not that the Company will have to sell the security before its market value recovers, and (iii) whether the present value of expected cash flows is sufficient to recover the entire amortized cost basis.  When assessing a security’s expected cash flows, the Company considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost and (ii) the financial condition and near-term prospects of the issuer.  In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by rating agencies have occurred, regulatory issues, and analysts’ reports. 

 

At June 30, 2019, there were 298 positions (combined AFS and HTM) with unrealized losses totaling $1.5 million.  40 of these positions were U.S. government treasury securities guaranteed by the U.S. government.  211 of these positions were U.S. government agency and mortgage-backed securities issued by U.S. government sponsored entities.  The remaining 47 positions were municipal securities. Because the declines in the market value of these securities were attributable to changes in interest rates and not credit quality, and because the Company had the ability and intent to hold these investments until there is a recovery in fair value, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired at June 30, 2019.

11 


 

NOTE 3 – LOANS, NET

 

Loan Portfolio Composition.  The composition of the loan portfolio was as follows:

 

(Dollars in Thousands)

June 30, 2019

 

December 31, 2018

Commercial, Financial and Agricultural

$

265,001

 

$

233,689

Real Estate – Construction

 

101,372

 

 

89,527

Real Estate – Commercial Mortgage

 

614,618

 

 

602,061

Real Estate – Residential(1)

 

362,974

 

 

342,215

Real Estate – Home Equity

 

201,579

 

 

210,111

Consumer(2)

 

289,638

 

 

296,622

 

Loans, Net of Unearned Income

$

1,835,182

 

$

1,774,225

             

 

(1)     Includes loans in process with outstanding balances of $14.2 million and $9.2 million at June 30, 2019 and December 31, 2018, respectively.

(2)     Includes overdraft balances of $1.4 million and $1.6 million at June 30, 2019 and December 31, 2018, respectively.  

 

Net deferred costs, which include premiums on purchased loans, included in loans were $1.8 million at June 30, 2019 and $1.5 million at December 31, 2018.

 

The Company has pledged a blanket floating lien on all 1-4 family residential mortgage loans, commercial real estate mortgage loans, and home equity loans to support available borrowing capacity at the FHLB and has pledged a blanket floating lien on all consumer loans, commercial loans, and construction loans to support available borrowing capacity at the Federal Reserve Bank of Atlanta.

 

Nonaccrual Loans.  Loans