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 September 30, 2009
OR
|
o
|
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
|
CAPITAL
CITY BANK GROUP, INC.
|
|
(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)
402-7000
|
|
(Registrant's
telephone number, including area
code)
|
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 o
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 o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer”, “accelerated
filer", and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
|
(Do
not check if smaller reporting company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
At
October 31, 2009, 17,032,340 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 SEPTEMBER 30, 2009
TABLE
OF CONTENTS
|
PART
I – Financial Information
|
Page
|
||
|
Item
1.
|
|||
|
4
|
|||
|
5
|
|||
|
6
|
|||
|
7
|
|||
|
8
|
|||
|
Item
2.
|
20
|
||
|
Item
3.
|
35
|
||
|
Item
4.
|
35
|
||
|
PART
II – Other Information
|
|||
|
Item
1.
|
35
|
||
|
Item
1A.
|
35
|
||
|
Item
2.
|
35
|
||
|
Item
3.
|
35
|
||
|
Item
4.
|
35
|
||
|
Item
5.
|
35
|
||
|
Item
6.
|
36
|
||
|
37
|
|||
|
38
|
|||
-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, the following sections of
our Annual Report on Form 10-K for the year ended December 31, 2008 (the “2008
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:
|
§
|
the
frequency and magnitude of foreclosure of our
loans;
|
|
§
|
the
adequacy of collateral underlying collateralized loans and our ability to
resell the collateral if we foreclose on the
loans;
|
|
§
|
the
effects of our lack of a diversified loan portfolio, including the risks
of geographic and industry
concentrations;
|
|
§
|
the
accuracy of our financial statement estimates and assumptions, including
the estimate for our loan loss
provision;
|
|
§
|
the
extent to which our nonperforming loans increase or decrease as a
percentage of our total loan
portfolio;
|
|
§
|
the
effects of federal and state banking laws on our ability to declare and
pay dividends;
|
|
§
|
our
ability to integrate the business and operations of companies and banks
that we have acquired, and those we may acquire in the
future;
|
|
§
|
our
need and our ability to incur additional debt or equity
financing;
|
|
§
|
the
strength of the United States economy in general and the strength of the
local economies in which we conduct
operations;
|
|
§
|
the
effects of harsh weather conditions, including
hurricanes;
|
|
§
|
inflation,
interest rate, market and monetary
fluctuations;
|
|
§
|
effect
of changes in the stock market and other capital
markets;
|
|
§
|
legislative
or regulatory changes;
|
|
§
|
our
ability to comply with the extensive laws and regulations to which we are
subject;
|
|
§
|
the
willingness of clients to accept third-party products and services rather
than our products and services and vice
versa;
|
|
§
|
changes
in the securities and real estate
markets;
|
|
§
|
increased
competition and its effect on
pricing;
|
|
§
|
technological
changes;
|
|
§
|
changes
in monetary and fiscal policies of the U.S.
Government;
|
|
§
|
the
effects of security breaches and computer viruses that may affect our
computer systems;
|
|
§
|
changes
in consumer spending and saving
habits;
|
|
§
|
growth
and profitability of our noninterest
income;
|
|
§
|
changes
in accounting principles, policies, practices or
guidelines;
|
|
§
|
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 referenced 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
CAPITAL
CITY BANK GROUP, INC.
AS
OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
|
(Dollars
In Thousands, Except Share Data)
|
September
30, 2009
|
December
31, 2008
|
||||||
|
ASSETS
|
||||||||
|
Cash
and Due From Banks
|
$
|
79,275
|
$
|
88,143
|
||||
|
Federal
Funds Sold and Interest Bearing Deposits
|
828
|
6,806
|
||||||
|
Total
Cash and Cash Equivalents
|
80,103
|
94,949
|
||||||
|
Investment
Securities, Available-for-Sale
|
183,944
|
191,569
|
||||||
|
Loans,
Net of Unearned Interest
|
1,958,032
|
1,957,797
|
||||||
|
Allowance
for Loan Losses
|
(45,401
|
)
|
(37,004
|
)
|
||||
|
Loans,
Net
|
1,912,631
|
1,920,793
|
||||||
|
Premises
and Equipment, Net
|
111,797
|
106,433
|
||||||
|
Goodwill
|
84,811
|
84,811
|
||||||
|
Other
Intangible Assets
|
5,040
|
8,072
|
||||||
|
Other
Assets
|
113,611
|
82,072
|
||||||
|
Total
Assets
|
$
|
2,491,937
|
$
|
2,488,699
|
||||
|
LIABILITIES
|
||||||||
|
Deposits:
|
||||||||
|
Noninterest
Bearing Deposits
|
$
|
397,943
|
$
|
419,696
|
||||
|
Interest
Bearing Deposits
|
1,552,047
|
1,572,478
|
||||||
|
Total
Deposits
|
1,949,990
|
1,992,174
|
||||||
|
Short-Term
Borrowings
|
103,711
|
62,044
|
||||||
|
Subordinated
Notes Payable
|
62,887
|
62,887
|
||||||
|
Other
Long-Term Borrowings
|
50,665
|
51,470
|
||||||
|
Other
Liabilities
|
56,269
|
41,294
|
||||||
|
Total
Liabilities
|
2,223,522
|
2,209,869
|
||||||
|
SHAREOWNERS'
EQUITY
|
||||||||
|
Preferred
Stock, $.01 par value, 3,000,000 shares authorized;
no
shares outstanding
|
-
|
-
|
||||||
|
Common
Stock, $.01 par value, 90,000,000 shares authorized; 17,032,337 and
17,126,997 shares issued and outstanding at September 30, 2009 and
December 31, 2008, respectively
|
170
|
171
|
||||||
|
Additional
Paid-In Capital
|
36,065
|
36,783
|
||||||
|
Retained
Earnings
|
253,104
|
262,890
|
||||||
|
Accumulated
Other Comprehensive Loss, Net of Tax
|
(20,924
|
)
|
(21,014
|
)
|
||||
|
Total
Shareowners' Equity
|
268,415
|
278,830
|
||||||
|
Total
Liabilities and Shareowners' Equity
|
$
|
2,491,937
|
$
|
2,488,699
|
||||
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
-4-
CAPITAL
CITY BANK GROUP, INC.
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||||
|
(Dollars
in Thousands, Except Per Share Data)
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
INTEREST
INCOME
|
|||||||||||||||||
|
Interest
and Fees on Loans
|
$
|
29,463
|
$
|
32,435
|
$
|
88,742
|
$
|
101,112
|
|||||||||
|
Investment
Securities:
|
|||||||||||||||||
|
U.S.
Treasuries
|
125
|
218
|
444
|
566
|
|||||||||||||
|
U.S.
Government Agencies
|
440
|
588
|
1,471
|
2,014
|
|||||||||||||
|
States
and Political Subdivisions
|
641
|
803
|
2,073
|
2,372
|
|||||||||||||
|
Other
Securities
|
117
|
135
|
285
|
495
|
|||||||||||||
|
Federal
Funds Sold
|
1
|
475
|
5
|
3,078
|
|||||||||||||
|
Total
Interest Income
|
30,787
|
34,654
|
93,020
|
109,637
|
|||||||||||||
|
INTEREST
EXPENSE
|
|||||||||||||||||
|
Deposits
|
2,626
|
5,815
|
7,621
|
23,458
|
|||||||||||||
|
Short-Term
Borrowings
|
113
|
230
|
269
|
1,047
|
|||||||||||||
|
Subordinated
Notes Payable
|
936
|
936
|
2,794
|
2,798
|
|||||||||||||
|
Other
Long-Term Borrowings
|
560
|
488
|
1,694
|
1,215
|
|||||||||||||
|
Total
Interest Expense
|
4,235
|
7,469
|
12,378
|
28,518
|
|||||||||||||
|
NET
INTEREST INCOME
|
26,552
|
27,185
|
80,642
|
81,119
|
|||||||||||||
|
Provision
for Loan Losses
|
12,347
|
10,425
|
29,183
|
19,999
|
|||||||||||||
|
Net
Interest Income After Provision For Loan Losses
|
14,205
|
16,760
|
51,459
|
61,120
|
|||||||||||||
|
NONINTEREST
INCOME
|
|||||||||||||||||
|
Service
Charges on Deposit Accounts
|
7,099
|
7,110
|
20,959
|
20,935
|
|||||||||||||
|
Data
Processing
|
914
|
873
|
2,680
|
2,498
|
|||||||||||||
|
Asset
Management Fees
|
960
|
1,025
|
2,860
|
3,300
|
|||||||||||||
|
Securities
Transactions
|
4
|
27
|
10
|
122
|
|||||||||||||
|
Mortgage
Banking Fees
|
663
|
331
|
2,149
|
1,331
|
|||||||||||||
|
Bank
Card Fees
|
2,398
|
2,431
|
7,940
|
10,300
|
|||||||||||||
|
Gain
on Sale of Portion of Merchant Services Portfolio
|
-
|
6,250
|
-
|
6,250
|
|||||||||||||
|
Other
|
2,266
|
2,165
|
6,382
|
8,993
|
|||||||||||||
|
Total
Noninterest Income
|
14,304
|
20,212
|
42,980
|
53,729
|
|||||||||||||
|
NONINTEREST
EXPENSE
|
|||||||||||||||||
|
Salaries
and Associate Benefits
|
15,660
|
15,417
|
48,946
|
46,339
|
|||||||||||||
|
Occupancy,
Net
|
2,455
|
2,373
|
7,340
|
7,226
|
|||||||||||||
|
Furniture
and Equipment
|
2,193
|
2,369
|
6,835
|
7,534
|
|||||||||||||
|
Intangible
Amortization
|
1,011
|
1,459
|
3,032
|
4,376
|
|||||||||||||
|
Other
|
10,296
|
8,298
|
30,649
|
24,995
|
|||||||||||||
|
Total
Noninterest Expense
|
31,615
|
29,916
|
96,802
|
90,470
|
|||||||||||||
|
INCOME
BEFORE INCOME TAXES
|
(3,106)
|
7,056
|
(2,363)
|
24,379
|
|||||||||||||
|
Income
Tax (Benefit) Expense
|
(1,618)
|
2,218
|
(2,299)
|
7,451
|
|||||||||||||
|
NET
(LOSS) INCOME
|
$
|
(1,488)
|
$
|
4,838
|
$
|
(64)
|
$
|
16,928
|
|||||||||
|
Basic
Net Income Per Share
|
$
|
(0.08)
|
$
|
0.29
|
$
|
0.00
|
$
|
0.99
|
|||||||||
|
Diluted
Net Income Per Share
|
$
|
(0.08)
|
$
|
0.29
|
$
|
0.00
|
$
|
0.99
|
|||||||||
|
Average
Basic Shares Outstanding
|
17,024,423
|
17,123,967
|
17,047,464
|
17,146,780
|
|||||||||||||
|
Average
Diluted Shares Outstanding
|
17,024,908
|
17,127,949
|
17,048,030
|
17,149,392
|
|||||||||||||
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
-5-
CAPITAL
CITY BANK GROUP, INC.
(Unaudited)
|
(Dollars
In Thousands, Except Share Data)
|
Shares
Outstanding
|
Common
Stock
|
Additional
Paid-In
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income, Net of Taxes
|
Total
|
||||||||||||
|
Balance,
December 31, 2008
|
17,126,997
|
$
|
171
|
$
|
36,783
|
$
|
262,890
|
$
|
(21,014
|
)
|
$
|
278,830
|
||||||
|
Comprehensive
Income:
|
||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
(64)
|
-
|
(64)
|
||||||||||||
|
Net
Change in Unrealized Gain On
Available-for-Sale
Securities (net of tax)
|
-
|
-
|
-
|
-
|
90
|
90
|
||||||||||||
|
Total
Comprehensive Income
|
-
|
-
|
-
|
26
|
||||||||||||||
|
Cash
Dividends ($.570 per share)
|
-
|
-
|
-
|
(9,722
|
)
|
-
|
(9,722
|
)
|
||||||||||
|
Stock
Performance Plan Compensation
|
-
|
-
|
(15
|
)
|
-
|
-
|
(15
|
)
|
||||||||||
|
Issuance
of Common Stock
|
51,228
|
-
|
996
|
-
|
-
|
996
|
||||||||||||
|
Repurchase
of Common Stock
|
(145,888
|
)
|
(1
|
)
|
(1,560
|
)
|
-
|
-
|
(1,561
|
)
|
||||||||
|
Balance,
September 30, 2009
|
17,032,337
|
$
|
170
|
$
|
36,065
|
$
|
253,10
|
$
|
(20,924
|
)
|
$
|
268,415
|
||||||
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
-6-
CAPITAL
CITY BANK GROUP, INC.
FOR
THE NINE MONTHS ENDED SEPTEMBER 30
(Unaudited)
|
(Dollars
in Thousands)
|
2009
|
2008
|
||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
|
Net
Income
|
$
|
(64
|
)
|
$
|
16,928
|
|||
|
Adjustments
to Reconcile Net Income to
Cash
Provided by Operating Activities:
|
||||||||
|
Provision
for Loan Losses
|
29,183
|
19,999
|
||||||
|
Depreciation
|
5,015
|
5,173
|
||||||
|
Net
Securities Amortization
|
1,692
|
616
|
||||||
|
Amortization
of Intangible Assets
|
3,032
|
4,376
|
||||||
|
Gain
on Sale of Portion of Merchant Services Portfolio
|
-
|
(6,250
|
)
|
|||||
|
Proceeds
From Sale of Portion of Merchant Services Portfolio
|
-
|
6,250
|
||||||
|
Gain
on Securities Transactions
|
(10
|
)
|
(122
|
)
|
||||
|
Origination
of Loans Held-for-Sale
|
(129,263
|
)
|
(87,612
|
)
|
||||
|
Proceeds
From Sales of Loans Held-for-Sale
|
130,564
|
90,927
|
||||||
|
Net
Gain From Sales of Loans Held-for-Sale
|
(2,149
|
)
|
(1,331
|
)
|
||||
|
Non-Cash
Compensation
|
-
|
19
|
||||||
|
Increase
in Deferred Income Taxes
|
4,443
|
1,081
|
||||||
|
Net
(Increase) Decrease in Other Assets
|
(6,907
|
)
|
10,818
|
|||||
|
Net
Increase (Decrease) in Other Liabilities
|
17,929
|
(10,283
|
)
|
|||||
|
Net
Cash Provided By Operating Activities
|
53,465
|
50,589
|
||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
|
Securities
Available-for-Sale:
|
||||||||
|
Purchases
|
(54,347
|
)
|
(75,528
|
)
|
||||
|
Sales
|
2,806
|
10,490
|
||||||
|
Payments,
Maturities, and Calls
|
57,687
|
61,504
|
||||||
|
Net
Increase in Loans
|
(52,470
|
)
|
(26,672
|
)
|
||||
|
Purchase
of Premises & Equipment
|
(10,381
|
)
|
(11,368
|
)
|
||||
|
Proceeds
From Sales of Premises & Equipment
|
2
|
-
|
||||||
|
Net
Cash Used In Investing Activities
|
(56,703
|
)
|
(41,574
|
)
|
||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
|
Decrease
in Deposits
|
(42,183
|
)
|
(179,561
|
)
|
||||
|
Net
Increase (Decrease) in Short-Term Borrowings
|
41,385
|
(6,053
|
)
|
|||||
|
Increase
in Other Long-Term Borrowings
|
2,666
|
28,526
|
||||||
|
Repayment
of Other Long-Term Borrowings
|
(3,189
|
)
|
(2,191
|
)
|
||||
|
Dividends
Paid
|
(9,722
|
)
|
(9,370
|
)
|
||||
|
Repurchase
of Common Stock
|
(1,561
|
)
|
(2,414
|
)
|
||||
|
Issuance
of Common Stock
|
996
|
832
|
||||||
|
Net
Cash Provided by Financing Activities
|
(11,608
|
)
|
(170,231
|
)
|
||||
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
(14,846
|
)
|
(161,216
|
)
|
||||
|
Cash
and Cash Equivalents at Beginning of Period
|
94,949
|
259,697
|
||||||
|
Cash
and Cash Equivalents at End of Period
|
$
|
80,103
|
$
|
98,481
|
||||
|
Supplemental
Disclosure:
|
||||||||
|
Interest
Paid on Deposits
|
$
|
7,775
|
$
|
25,135
|
||||
|
Interest
Paid on Debt
|
$
|
4,763
|
$
|
5,040
|
||||
|
Taxes
Paid
|
$
|
5,667
|
$
|
14,027
|
||||
|
Loans
Transferred to Other Real Estate Owned
|
$
|
32,298
|
$
|
5,788
|
||||
|
Issuance
of Common Stock as Non-Cash Compensation
|
$
|
154
|
$
|
1
|
||||
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
-7-
CAPITAL
CITY BANK GROUP, INC.
|
NOTE 1
- SIGNIFICANT
ACCOUNTING POLICIES
|
Basis
of Presentation
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.
The
unaudited consolidated financial statements included herein have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission, including Regulation S-X. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and
regulations. Prior period financial statements have been reformatted
and amounts reclassified, as necessary, to conform with the current
presentation. The Company and its subsidiary follow accounting
principles generally accepted in the United States (“GAAP”) and reporting
practices applicable to the banking industry. The principles that
materially affect its financial position, results of operations and cash flows
are set forth in the Notes to Consolidated Financial Statements which are
included in the 2008 Form 10-K.
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 September 30, 2009
and December 31, 2008, the results of operations for the three and nine months
ended September 30, 2009 and 2008, and cash flows for the nine months ended
September 30, 2009 and 2008. The Company has evaluated subsequent
events for potential recognition and/or disclosure through November 6, 2009, the
date the consolidated financial statements included in this Quarterly Report on
Form 10-Q were issued.
|
NOTE
2 - INVESTMENT SECURITIES
|
The
amortized cost and related market value of investment securities
available-for-sale were as follows:
|
September
30, 2009
|
||||||||||||||||
|
(Dollars
in Thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Market
Value
|
||||||||||||
|
U.S.
Treasury
|
$
|
22,318
|
$
|
274
|
$
|
-
|
$
|
22,592
|
||||||||
|
U.S.
Government Agencies
|
1,500
|
6
|
-
|
1,506
|
||||||||||||
|
States
and Political Subdivisions
|
107,266
|
1,429
|
45
|
108,650
|
||||||||||||
|
Residential
Mortgage-Backed Securities
|
36,848
|
845
|
33
|
37,660
|
||||||||||||
|
Other
Securities(1)
|
13,536
|
-
|
-
|
13,536
|
||||||||||||
|
Total
Investment Securities
|
$
|
181,468
|
$
|
2,554
|
$
|
78
|
$
|
183,944
|
||||||||
|
December
31, 2008
|
||||||||||||||||
|
(Dollars
in Thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Market
Value
|
||||||||||||
|
U.S.
Treasury
|
$
|
29,094
|
$
|
577
|
$
|
-
|
$
|
29,671
|
||||||||
|
U.S.
Government Agencies
|
7,091
|
180
|
-
|
7,271
|
||||||||||||
|
States
and Political Subdivisions
|
100,370
|
1,224
|
32
|
101,562
|
||||||||||||
|
Residential
Mortgage-Backed Securities
|
39,860
|
332
|
116
|
40,076
|
||||||||||||
|
Other
Securities(1)
|
12,882
|
107
|
-
|
12,989
|
||||||||||||
|
Total
Investment Securities
|
$
|
189,297
|
$
|
2,420
|
$
|
148
|
$
|
191,569
|
||||||||
|
(1)
|
Includes Federal Home Loan
Bank and Federal Reserve Bank stock recorded at cost of $7.7 million and
$4.8 million, respectively, at September 30, 2009, and $7.0 million and
$4.8 million, respectively, at December 31, 2008. Also, balance includes a
bank preferred stock issue recorded at $1.0 million and $1.1 million at
September 30, 2009 and December 31, 2008,
respectively.
|
-8-
The
Company’s subsidiary, Capital City Bank, as a member of the Federal Home Loan
Bank (“FHLB”) of Atlanta, is required to own capital stock in the FHLB of
Atlanta based generally upon the balances of residential and commercial real
estate loans, and FHLB advances. FHLB stock of $7.7 million which is
included in other 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.
Maturity Distribution. As of
September 30, 2009, 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
|
$
|
72,007
|
$
|
72,738
|
||||
|
Due
after one through five years
|
95,436
|
97,169
|
||||||
|
Due
after five through ten years
|
1,489
|
1,501
|
||||||
|
Due
over ten years
|
-
|
-
|
||||||
|
No
Maturity
|
12,536
|
12,536
|
||||||
|
Total
Investment Securities
|
$
|
181,468
|
$
|
183,944
|
||||
Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
NOTE
3 - LOANS
The
composition of the Company's loan portfolio was as follows:
|
(Dollars
in Thousands)
|
September
30, 2009
|
December
31, 2008
|
||||||
|
Commercial,
Financial and Agricultural
|
$
|
203,813
|
$
|
206,230
|
||||
|
Real
Estate-Construction
|
128,476
|
141,973
|
||||||
|
Real
Estate-Commercial
|
704,595
|
656,959
|
||||||
|
Real
Estate-Residential(1)
|
429,087
|
481,034
|
||||||
|
Real
Estate-Home Equity
|
243,808
|
218,500
|
||||||
|
Real
Estate-Loans Held-for-Sale
|
3,418
|
3,204
|
||||||
|
Consumer
|
244,835
|
249,897
|
||||||
|
Loans,
Net of Unearned Interest
|
$
|
1,958,032
|
$
|
1,957,797
|
||||
|
(1)
|
Includes
loans in process with outstanding balances of $6.7 million and $13.9
million for September 30, 2009 and December 31, 2008,
respectively.
|
Net
deferred fees included in loans at September 30, 2009 and December 31, 2008 were
$2.0 million and $1.9 million, respectively.
NOTE
4 - ALLOWANCE FOR LOAN LOSSES
An
analysis of the changes in the allowance for loan losses for the nine month
periods ended September 30 was as follows:
|
(Dollars
in Thousands)
|
2009
|
2008
|
||||||
|
Balance,
Beginning of Period
|
$
|
37,004
|
$
|
18,066
|
||||
|
Provision
for Loan Losses
|
29,183
|
19,999
|
||||||
|
Recoveries
on Loans Previously Charged-Off
|
2,249
|
1,799
|
||||||
|
Loans
Charged-Off
|
(23,035
|
)
|
(9,320
|
)
|
||||
|
Balance,
End of Period
|
$
|
45,401
|
$
|
30,544
|
||||
Impaired
Loans. Loans are considered impaired when, based on current
information and events, it is probable the Company will be unable to collect all
amounts due in accordance with the original contractual terms of the loan
agreement, including scheduled principal and interest
payments. Selected information pertaining to impaired loans is
depicted in the table below:
|
September
30, 2009
|
December
31, 2008
|
|||||||||||||||
|
(Dollars
in Thousands)
|
Balance
|
Valuation
Allowance
|
Balance
|
Valuation
Allowance
|
||||||||||||
|
Impaired
Loans:
|
||||||||||||||||
|
With
Related Valuation Allowance
|
$
|
95,506
|
$
|
22,395
|
$
|
68,705
|
$
|
15,901
|
||||||||
|
Without
Related Valuation Allowance
|
25,507
|
-
|
37,723
|
-
|
||||||||||||
-9-
|
NOTE
5 - INTANGIBLE ASSETS
|
The
Company had net intangible assets of $89.9 million and $92.9 million at
September 30, 2009 and December 31, 2008, respectively. Intangible
assets were as follows:
|
September
30, 2009
|
December
31, 2008
|
|||||||||||||||
|
(Dollars
in Thousands)
|
Gross
Amount
|
Accumulated
Amortization
|
Gross
Amount
|
Accumulated
Amortization
|
||||||||||||
|
Core
Deposit Intangibles
|
$
|
47,176
|
$
|
42,980
|
$
|
47,176
|
$
|
40,092
|
||||||||
|
Goodwill
|
84,811
|
-
|
84,811
|
-
|
||||||||||||
|
Customer
Relationship Intangible
|
1,867
|
1,023
|
1,867
|
879
|
||||||||||||
|
Total
Intangible Assets
|
$
|
133,854
|
$
|
44,003
|
$
|
133,854
|
$
|
40,971
|
||||||||
Net Core Deposit
Intangibles: As of September 30, 2009 and December 31, 2008,
the Company had net core deposit intangibles of $4.20 million and $7.1 million,
respectively. Amortization expense for the first nine months of 2009
and 2008 was approximately $2.9 million and $2.9 million,
respectively. Estimated annual amortization expense for 2009 is $3.8
million.
Goodwill: As of
September 30, 2009 and December 31, 2008, the Company had goodwill, net of
accumulated amortization, of $84.8 million. Goodwill is the Company's
only intangible asset that is no longer subject to amortization under the
provisions of Accounting Standards Codification (“ASC”) 350-20-35-1 (Formerly
Statement of Financial Accounting Standards (“SFAS” No. 142)), “Goodwill and
Other Intangible Assets.”
Other: As of
September 30, 2009 and December 31, 2008, the Company had a customer
relationship intangible asset, net of accumulated amortization, of $0.8 million
and $1.0 million, respectively. This intangible asset was recorded as
a result of the March 2004 acquisition of trust customer relationships from
Synovus Trust Company. Amortization expense for the first nine months
of 2009 and 2008 was approximately $144,000. Estimated annual
amortization expense is approximately $191,000 based on use of a 10-year useful
life.
NOTE
6 - DEPOSITS
The
composition of the Company's interest bearing deposits at September 30, 2009 and
December 31, 2008 was as follows:
|
(Dollars
in Thousands)
|
September
30, 2009
|
December
31, 2008
|
||||||
|
NOW
Accounts
|
$
|
687,679
|
$
|
758,976
|
||||
|
Money
Market Accounts
|
301,662
|
324,646
|
||||||
|
Savings
Deposits
|
122,040
|
115,261
|
||||||
|
Other
Time Deposits
|
440,666
|
373,595
|
||||||
|
Total
Interest Bearing Deposits
|
$
|
1,552,047
|
$
|
1,572,478
|
||||
-10-
|
NOTE
7 - STOCK-BASED COMPENSATION
|
The
Company recognizes the cost of stock-based associate stock compensation in
accordance with ASC-718-20-05-1 and ASC 718-50-05-01, (formerly SFAS No. 123R),
"Share-Based Payment” (Revised) under the fair value method.
As of
September 30, 2009, the Company had three stock-based compensation plans,
consisting of the 2005 Associate Stock Incentive Plan ("ASIP"), the 2005
Associate Stock Purchase Plan ("ASPP"), and the 2005 Director Stock Purchase
Plan ("DSPP"). Total compensation expense associated with these plans
for the nine months ended September 30, 2009 and 2008 was $111,000 and $131,000,
respectively. The Company, under the terms and conditions of the
ASIP, maintained a 2011 Incentive Plan, which was terminated in March 2008, and
the Company reversed approximately $577,000 in related stock compensation
expense in conjunction with the termination of the Company’s 2011 strategic
initiative.
ASIP. The Company's ASIP allows the Company's Board of Directors to award key associates various forms of equity-based incentive compensation. Under the ASIP, all participants in this plan are eligible to earn an equity award, in the form of restricted stock. The Company, under the terms and conditions of the ASIP, created the 2009 Incentive Plan (“2009 Plan”), which has an award tied to an internally established earnings goal for 2009. The grant-date fair value of the shares eligible to be awarded in 2009 is approximately $718,000. In addition, each plan participant is eligible to receive from the Company a tax supplement bonus equal to 31% of the stock award value at the time of issuance. A total of 53,795 shares are eligible for issuance. There has been no expense recognized for the first nine months of 2009 as results fell short of the earnings performance goal.
A total of 875,000 shares of common stock have been reserved for issuance under the ASIP. To date, the Company has issued a total of 67,022 shares of common stock under the ASIP.
Executive Stock Option
Agreement. Prior to 2007, the Company maintained a stock
option arrangement for a key executive officer (William G. Smith, Jr. -
Chairman, President and CEO, CCBG). The status of the options granted
under this arrangement is detailed in the table provided below. In
2007, the Company replaced its practice of entering into a stock option
arrangement by establishing a Performance Share Unit Plan under the provisions
of the ASIP that allows the executive to earn shares based on the compound
annual growth rate in diluted earnings per share over a three-year
period. The details of this program for the executive are outlined in
a Form 8-K filing dated January 31, 2007. No expense related to this
plan was recognized for the first six months of 2009 and 2008 as results fell
short of the earnings performance goal.
A summary
of the status of the Company’s option shares as of September 30, 2009 is
presented below:
|
Options
|
Shares
|
Weighted-Average
Exercise Price
|
Weighted-Average
Remaining Term
|
Aggregate
Intrinsic Value
|
||||||||||||
|
Outstanding
at January 1, 2009
|
60,384 | $ | 32.79 | 5.9 | $ | - | ||||||||||
|
Granted
|
- | - | - | - | ||||||||||||
|
Exercised
|
- | - | - | - | ||||||||||||
|
Forfeited
or expired
|
- | - | - | - | ||||||||||||
|
Outstanding
at September 30, 2009
|
60,384 | $ | 32.79 | 5.1 | $ | - | ||||||||||
|
Exercisable
at September 30, 2009
|
60,384 | $ | 32.79 | 5.1 | $ | - | ||||||||||
Compensation
expense associated with the aforementioned option shares was fully recognized as
of December 31, 2007.
DSPP. The
Company's DSPP allows the directors to purchase the Company's common stock at a
price equal to 90% of the closing price on the date of
purchase. Stock purchases under the DSPP are limited to the amount of
the director’s annual cash compensation. The DSPP has 93,750 shares
reserved for issuance. A total of 58,559 shares have been issued
since the inception of the DSPP. For the first nine months 2009, the
Company recognized approximately $20,000 in expense related to this
plan. For the first nine months of 2008, the Company recognized
approximately $25,521 in expense related to the DSPP.
ASPP. Under the
Company's ASPP, substantially all associates may purchase the Company's common
stock through payroll deductions at a price equal to 90% of the lower of the
fair market value at the beginning or end of each six-month offering
period. Stock purchases under the ASPP are limited to 10% of an
associate's eligible compensation, up to a maximum of $25,000 (fair market value
on each enrollment date) in any plan year. Shares are issued at the
beginning of the quarter following each six-month offering
period. The ASPP has 593,750 shares of common stock reserved for
issuance. A total of 111,586 shares have been issued since inception
of the ASPP. For the first nine months of 2009, the Company
recognized approximately $76,000 in expense related to the ASPP plan compared to
$82,000 in expense for the same period in 2008.
-11-
NOTE 8 - EMPLOYEE BENEFIT PLANS
The
Company has a defined benefit pension plan covering substantially all full-time
and eligible part-time associates and a Supplemental Executive Retirement Plan
(“SERP”) covering its executive officers.
The
components of the net periodic benefit costs for the Company's qualified benefit
pension plan were as follows:
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
|
(Dollars
in Thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
|
Discount
Rate
|
6.00
|
%
|
6.25
|
%
|
6.00
|
%
|
6.25
|
%
|
||||||||
|
Long-Term
Rate of Return on Assets
|
8.00
|
%
|
8.00
|
%
|
8.00
|
%
|
8.00
|
%
|
||||||||
|
Service
Cost
|
$
|
1,398
|
$
|
1,279
|
$
|
4,194
|
$
|
3,837
|
||||||||
|
Interest
Cost
|
1,147
|
1,063
|
3,441
|
3,189
|
||||||||||||
|
Expected
Return on Plan Assets
|
(1,265
|
)
|
(1,253
|
)
|
(3,795
|
)
|
(3,759
|
)
|
||||||||
|
Prior
Service Cost Amortization
|
127
|
75
|
382
|
225
|
||||||||||||
|
Net
Loss Amortization
|
739
|
280
|
2,216
|
840
|
||||||||||||
|
Net
Periodic Benefit Cost
|
$
|
2,146
|
$
|
1,444
|
$
|
6,438
|
$
|
4,332
|
||||||||
The
components of the net periodic benefit costs for the Company's SERP were as
follows:
|
Three
Months Ended
September 30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
|
(Dollars
in Thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
|
Discount
Rate
|
6.00
|
%
|
6.25
|
%
|
6.00
|
%
|
6.25
|
%
|
||||||||
|
Service
Cost
|
$
|
5
|
$
|
22
|
$
|
15
|
$
|
66
|
||||||||
|
Interest
Cost
|
45
|
56
|
134
|
168
|
||||||||||||
|
Prior
Service Cost Amortization
|
45
|
2
|
135
|
6
|
||||||||||||
|
Net
Loss Amortization
|
(88)
|
1
|
(263)
|
3
|
||||||||||||
|
Net
Periodic Benefit Cost
|
$
|
7
|
$
|
81
|
$
|
21
|
$
|
243
|
||||||||
|
NOTE
9 - COMMITMENTS AND CONTINGENCIES
|
Lending
Commitments. 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 clients. These financial instruments consist
of 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 September 30, 2009, the amounts associated
with the Company’s off-balance sheet obligations were as follows:
|
(Dollars
in Millions)
|
Amount
|
|||
|
Commitments
to Extend Credit(1)
|
$
|
367
|
||
|
Standby
Letters of Credit
|
$
|
14
|
||
|
(1)
|
Commitments include unfunded
loans, revolving lines of credit, and other unused
commitments.
|
Commitments
to extend credit are agreements to lend to a client 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.
Contingencies. The
Company is a party to lawsuits and claims arising out of the normal course of
business. In management's opinion, there are no known pending claims
or litigation, the outcome of which would, individually or in the aggregate,
have a material effect on the consolidated results of operations, financial
position, or cash flows of the Company.
-12-
Indemnification
Obligation. The Company is a member of the Visa U.S.A.
network. Visa U.S.A believes that its member banks are required to
indemnify Visa U.S.A. for potential future settlement of certain litigation (the
“Covered Litigation”). The Company recorded a charge in its fourth
quarter 2007 financial statements of approximately $1.9 million, or $0.07 per
diluted common share, to recognize its proportionate contingent liability
related to the costs of the judgments and settlements from the Covered
Litigation.
The
Company reversed a portion of the Covered Litigation accrual in the amount of
approximately $1.1 million to account for the establishment of a litigation
escrow account by Visa Inc., the parent company of Visa U.S.A., in conjunction
with Visa’s initial public offering during the first quarter of
2008. This escrow account was established to pay the costs of the
judgments and settlements from the Covered Litigation. Approximately
$0.8 million remains accrued for the contingent liability related to remaining
Covered Litigation.
In
October 2008 and July 2009, Visa Inc. funded additional amounts of $1.1 billion
and $700 million, respectively, into the litigation escrow account to fund the
settlement of the Discover Financial Services litigation and additional pending
litigation, which in effect reduced the exchange ratio for the Company’s Class B
shares of Visa Inc. While the Company could be required to separately
fund its proportionate share of any Covered Litigation losses, it is expected
that this litigation escrow account will be used to pay all or a substantial
amount of the losses.
NOTE
10 - COMPREHENSIVE INCOME
FASB
Topic ASC 220, “Comprehensive Income” (Formerly SFAS No. 130,) requires that
certain transactions and other economic events that bypass the income statement
be displayed as other comprehensive income. Comprehensive income
totaled $26,000 for the nine months ended September 30, 2009 and $17.0 million
for the comparable period in 2008. The Company’s comprehensive income
consists of net income and changes in unrealized gains and losses on securities
available-for-sale (net of income taxes) and changes in the pension liability
(net of taxes). The after-tax increase in net unrealized gains on
securities totaled approximately $90,000 for the nine months ended September 30,
2009. The after-tax increase in the net unrealized gains on
securities totaled approximately $155,000 for the nine months ended September
30, 2008. Reclassification adjustments consist only of realized gains
and losses on sales of investment securities and were not material for the same
comparable periods. As of September 30, 2009, total accumulated other
comprehensive income (net of taxes) totaled $20.9 million consisting of a
pension liability of $22.5 million and an unrealized gain on investment
securities of $1.6 million. For the nine month period ended September
30, 2009, there was no change in the company’s pension liability as this
liability is adjusted on an annual basis at December 31st.
NOTE
11 – FAIR VALUE MEASUREMENTS
The
Company adopted the provisions of ASC 820-10 (Formerly SFAS No. 157),
"Fair Value Measurements," for financial assets and financial liabilities
effective January 1, 2008. Subsequently, on January 1, 2009, the
Company adopted ASC 820-10-15 (Formerly SFAS No. 157-2) "Effective Date of FASB
Statement No. 157" for non-financial assets and non-financial
liabilities. ASC 820-10 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements.
ASC
820-10 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants. A fair value measurement assumes that the transaction to sell the
asset or transfer the liability occurs in the principal market for the asset or
liability or, in the absence of a principal market, the most advantageous market
for the asset or liability. The price in the principal (or most
advantageous) market used to measure the fair value of the asset or liability
shall not be adjusted for transaction costs. An orderly transaction
is a transaction that assumes exposure to the market for a period prior to the
measurement date to allow for marketing activities that are usual and customary
for transactions involving such assets and liabilities; it is not a forced
transaction. Market participants are buyers and sellers in the
principal market that are (i) independent, (ii) knowledgeable,
(iii) able to transact, and (iv) willing to transact.
ASC
820-10 requires the use of valuation techniques that are consistent with the
market approach, the income approach and/or the cost approach. The
market approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets and
liabilities. The income approach uses valuation techniques to convert
future amounts, such as cash flows or earnings, to a single present amount on a
discounted basis. The cost approach is based on the amount that
currently would be required to replace the service capacity of an asset
(replacement cost). Valuation techniques should be consistently
applied. Inputs to valuation techniques refer to the assumptions that
market participants would use in pricing the asset or
liability. Inputs may be observable, meaning those that reflect the
assumptions market participants would use in pricing the asset or liability
developed based on market data obtained from independent sources, or
unobservable, meaning those that reflect the reporting entity's own assumptions
about the assumptions market participants would use in pricing the asset or
liability developed based on the best information available in the
circumstances. In that regard, ASC 820-10 establishes a fair value
hierarchy for valuation inputs that gives the highest priority to quoted prices
in active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The fair value hierarchy is as
follows:
-13-
Level 1 Inputs -
Unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
Level 2 Inputs - Inputs
other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly. These might include quoted
prices for similar assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not active,
inputs other than quoted prices that are observable for the asset or liability
(such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or
inputs that are derived principally from or corroborated by market data by
correlation or other means.
Level 3 Inputs -
Unobservable inputs for determining the fair values of assets or
liabilities that reflect an entity's own assumptions about the assumptions that
market participants would use in pricing the assets or liabilities.
A
description of the valuation methodologies used for instruments measured at fair
value, as well as the general classification of such instruments pursuant to the
valuation hierarchy, is set forth below. These valuation methodologies were
applied to all of the Company’s financial assets and financial liabilities
carried at fair value effective January 1, 2008.
In
general, fair value is based upon quoted market prices, where
available. If such quoted market prices are not available, fair value
is based upon models that primarily use, as inputs, observable market-based
parameters. Valuation adjustments may be made to ensure that
financial instruments are recorded at fair value. These adjustments
may include amounts to reflect counterparty credit quality, the Company’s
creditworthiness, among other things, as well as unobservable
parameters. Any such valuation adjustments are applied consistently
over time. The Company’s valuation methodologies may produce a fair
value calculation that may not be indicative of net realizable value or
reflective of future fair values. While management believes the Company’s
valuation methodologies are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the
fair value of certain financial instruments could result in a different estimate
of fair value at the reporting date.
Securities Available for
Sale. Securities classified as available for sale are reported
at fair value on a recurring basis utilizing Level 1, 2, or 3
inputs. For these securities, the Company obtains fair value
measurements from an independent pricing service or a model that uses, as
inputs, observable market based parameters. The fair value
measurements consider observable data that may include quoted prices in active
markets, or other inputs, including dealer quotes, market spreads, cash flows,
the U.S. Treasury yield curve, live trading levels, trade execution data, market
consensus prepayment speeds, and credit information and the bond's terms and
conditions.
The
following table summarizes financial assets and financial liabilities measured
at fair value on a recurring basis as of September 30, 2009, segregated by the
level of the valuation inputs within the fair value hierarchy utilized to
measure fair value:
|
(Dollars
in Thousands)
|
Level
1 Inputs
|
Level
2 Inputs
|
Level
3 Inputs(1)
|
Total
Fair
Value
|
||||||||||||
|
Securities
Available for Sale
|
$ | 26,085 | $ | 144,323 | $ | 1,000 | $ | 171,408 | ||||||||
|
(1)
|
Reflects
one bank preferred stock issue of $1.0 million with fair value based on an
internal valuation model.
|
Certain
financial and non-financial assets measured at fair value on a nonrecurring
basis are detailed below; that is, the instruments are not measured at fair
value on an ongoing basis but are subject to fair value adjustments in certain
circumstances (for example, when there is evidence of
impairment). Financial and non-financial liabilities measured at fair
value on a nonrecurring basis were not significant at September 30,
2009.
Impaired Loans. On
a non-recurring basis, certain impaired loans are reported at the fair value of
the underlying collateral if repayment is expected solely from the liquidation
of collateral. Collateral values are estimated using Level 2 inputs
based on customized discounting criteria. Impaired loans had a
carrying value of $121.0 million, with a valuation allowance of $22.4 million,
resulting in an additional provision for loan losses of $6.5 million for the
nine month period ended September 30, 2009.
Loans Held for
Sale. Loans held for sale were $3.4 million as of September
30, 2009. These loans are carried at the lower of cost or fair value
and are adjusted to fair value on a non-recurring basis. Fair value
is based on observable markets rates for comparable loan products which is
considered a Level 2 fair value measurement.
-14-
Other Real Estate
Owned. During the first nine months of 2009, certain
foreclosed assets, upon initial recognition, were measured and reported at fair
value through a charge-off to the allowance for possible loan losses based on
the fair value of the foreclosed asset. The fair value of the
foreclosed asset, upon initial recognition, is estimated using Level 2 inputs
based on observable market data. Foreclosed assets measured at fair
value upon initial recognition totaled $43.5 million during the nine months
ended September 30, 2009. In connection with the measurement and
initial recognition of the foregoing foreclosed assets, the Company recognized
gross charge-offs to the allowance for loan losses totaling $10.3
million. In addition, the Company recognized subsequent losses
totaling $2.5 million for foreclosed assets that were re-valued during the nine
months ended September 30, 2009. The carrying value of foreclosed
assets was $33.4 million at September 30, 2009.
Effective
January 1, 2008, the Company adopted the provisions of ASC 825-10 (Formerly
SFAS No. 159), "The Fair Value Option for Financial Assets and Financial
Liabilities - Including an Amendment of ASC 320-10 (Formerly FASB Statement
No. 115)." ASC 825-10 permits the Company to choose to measure eligible
items at fair value at specified election dates. Changes in fair
value on items for which the fair value measurement option has been elected are
reported in earnings at each subsequent reporting date. The fair
value option (i) is applied instrument by instrument, with certain
exceptions, thus the Company may record identical financial assets and
liabilities at fair value or by another measurement basis permitted under
generally accepted accounting principles, (ii) is irrevocable (unless a new
election date occurs), and (iii) is applied only to entire instruments and
not to portions of instruments. Adoption of ASC 825-on
January 1, 2008 did not have a significant impact on the Company’s
financial statements because the Company did not elect fair value measurement
under ASC 825-10.
ASC
942-320-50 (Formerly SFAS 107), “Disclosures about Fair Value of Financial
Instruments,” as amended, requires disclosure of the fair value of financial
assets and financial liabilities, including those financial assets and financial
liabilities that are not measured and reported at fair value on a recurring
basis or non-recurring basis. A detailed description of the valuation
methodologies used in estimating the fair value of financial instruments is set
forth in the 2008 Form 10-K.
The
Company’s financial instruments that have estimated fair values are presented
below:
|
September
30, 2009
|
December
31, 2008
|
|||||||||||||||
|
(Dollars
in Thousands)
|
Carrying
Value
|
Estimated
Fair
Value
|
Carrying
Value
|
Estimated
Fair
Value
|
||||||||||||
|
Financial
Assets:
|
||||||||||||||||
|
Cash
|
$
|
79,275
|
$
|
79,275
|
$
|
88,143
|
$
|
88,143
|
||||||||
|
Short-Term
Investments
|
828
|
828
|
6,806
|
6,806
|
||||||||||||
|
Investment
Securities
|
183,944
|
183,944
|
191,569
|
191,569
|
||||||||||||
|
Loans,
Net of Allowance for Loan Losses
|
1,912,631
|
1,900,006
|
1,920,793
|
1,915,887
|
||||||||||||
|
Total
Financial Assets
|
$
|
2,176,678
|
$
|
2,164,053
|
$
|
2,207,311
|
$
|
2,202,405
|
||||||||
|
Financial
Liabilities:
|
||||||||||||||||
|
Deposits
|
$
|
1,949,990
|
$
|
1,868,873
|
$
|
1,992,174
|
$
|
1,960,361
|
||||||||
|
Short-Term
Borrowings
|
103,711
|
102,665
|
62,044
|
61,799
|
||||||||||||
|
Subordinated
Notes Payable
|
62,887
|
62,255
|
62,887
|
63,637
|
||||||||||||
|
Long-Term
Borrowings
|
50,665
|
53,110
|
51,470
|
57,457
|
||||||||||||
|
Total
Financial Liabilities
|
$
|
2,167,253
|
$
|
2,086,903
|
$
|
2,168,575
|
$
|
2,143,254
|
||||||||
All
non-financial instruments are excluded from the above table. The
disclosures also do not include certain intangible assets such as client
relationships, deposit base intangibles and goodwill. Accordingly,
the aggregate fair value amounts presented do not represent the underlying value
of the Company.
NOTE
12 – NEW AUTHORITATIVE ACCOUNTING GUIDANCE
Significant
Accounting Policies, on July 1, 2009, the Accounting Standards Codification
became FASB’s officially recognized source of authoritative U.S. generally
accepted accounting principles applicable to all public and non-public
non-governmental entities, superseding existing FASB, AICPA, EITF and related
literature. Rules and interpretive releases of the SEC under the authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. All other accounting literature is considered non-authoritative.
The switch to the ASC affects the away companies refer to U.S. GAAP in financial
statements and accounting policies. Citing particular content in the ASC
involves specifying the unique numeric path to the content through the Topic,
Subtopic, Section and Paragraph structure.
FASB ASC Topic 260, “Earnings Per Share.” (Formerly FSP No. EITF 03-6-1) New authoritative accounting guidance under ASC Topic 260-10 provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. ASC Topic 260-10 became effective on January 1, 2009 and did not have a significant impact on the Company’s financial statements.
-15-
FASB ASC Topic 320, “Investments -
Debt and Equity Securities.” (Formerly SFAS 115-2 and SFAS
124-2) New authoritative accounting guidance under ASC Topic
320, (i) changes existing guidance for determining whether an
impairment is other than temporary to debt securities and (ii) replaces the
existing requirement that the entity’s management assert it has both the intent
and ability to hold an impaired security until recovery with a requirement that
management assert: (a) it does not have the intent to sell the security;
and (b) it is more likely than not it will not have to sell the security
before recovery of its cost basis. Under ASC Topic 320, declines in the fair
value of held-to-maturity and available-for-sale securities below their cost
that are deemed to be other than temporary are reflected in earnings as realized
losses to the extent the impairment is related to credit losses. The amount of
the impairment related to other factors is recognized in other comprehensive
income. The Company adopted the provisions of the new authoritative accounting
guidance under ASC Topic 320 during the second quarter of 2009. Adoption of the
new guidance did not significantly impact the Company’s financial
statements.
FASB ASC Topic 715, “Compensation -
Retirement Benefits.” (Formerly FSP No. 132(R)-1) New authoritative
accounting guidance under ASC Topic 715, “Compensation - Retirement Benefits,”
provides guidance related to an employer’s disclosures about plan assets of
defined benefit pension or other post-retirement benefit plans. Under ASC Topic
715, disclosures should provide users of financial statements with an
understanding of how investment allocation decisions are made, the factors that
are pertinent to an understanding of investment policies and strategies, the
major categories of plan assets, the inputs and valuation techniques used to
measure the fair value of plan assets, the effect of fair value measurements
using significant unobservable inputs on changes in plan assets for the period
and significant concentrations of risk within plan assets. The disclosures
required by ASC Topic 715 will be included in the Company’s financial statements
beginning with the financial statements for the year-ended December 31,
2009.
ASC Topic 805, “Business Combinations.” (Formerly SFAS No. 141) On January 1, 2009, new authoritative accounting guidance under ASC Topic 805 applies to all transactions and other events in which one entity obtains control over one or more other businesses. ASC Topic 805 requires an acquirer, upon initially obtaining control of another entity, to recognize the assets, liabilities and any non-controlling interest in the acquirer at fair value as of the acquisition date. Contingent consideration is required to be recognized and measured at fair value on the date of acquisition rather than at a later date when the amount of that consideration may be determinable beyond a reasonable doubt. This fair value approach replaces the cost-allocation process required under previous accounting guidance whereby the cost of an acquisition was allocated to the individual assets acquired and liabilities assumed based on their estimated fair value. ASC Topic requires acquirers to expense acquisition-related costs as incurred rather than allocating such costs to the assets acquired and liabilities assumed, as was previously the case under prior accounting guidance. Under ASC Topic 805, the requirements of ASC Topic 420, “Accounting for Costs Associated with Exit or Disposal Activities,” would have to be met in order to accrue for a restructuring plan in purchase accounting. Pre-acquisition contingencies are to be recognized at fair value, unless it is a non-contractual contingency that is not likely to materialize, in which case, nothing should be recognized in purchase accounting and, instead, that contingency would be subject to the probable and estimable recognition criteria of ASC Topic 450, “Accounting for Contingencies.” ASC Topic 805 is applicable to the Company’s accounting for business combinations closing on or after January 1, 2009.
FASB ASC Topic 810,
“Consolidation.” (Formerly SFAS No. 160) New
authoritative accounting guidance under ASC Topic 810, “Consolidation,” amended
prior guidance to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. Under ASC Topic 810, a non-controlling interest in a subsidiary,
which is sometimes referred to as minority interest, is an ownership interest in
the consolidated entity that should be reported as a component of equity in the
consolidated financial statements. Among other requirements, ASC Topic 810
requires consolidated net income to be reported at amounts that include the
amounts attributable to both the parent and the non-controlling interest. It
also requires disclosure, on the face of the consolidated income statement, of
the amounts of consolidated net income attributable to the parent and to the
non-controlling interest. The new authoritative accounting guidance under ASC
Topic 810 became effective for the Company on January 1, 2009 and did not
have a significant impact on the Company’s financial statements.
Further
new authoritative accounting guidance under ASC Topic 810 amends prior guidance
to change how a company determines when an entity that is insufficiently
capitalized or is not controlled through voting (or similar rights) should be
consolidated. The determination of whether a company is required to consolidate
an entity is based on, among other things, an entity’s purpose and design and a
company’s ability to direct the activities of the entity that most significantly
impact the entity’s economic performance. The new authoritative accounting
guidance requires additional disclosures about the reporting entity’s
involvement with variable-interest entities and any significant changes in risk
exposure due to that involvement as well as its affect on the entity’s financial
statements. The new authoritative accounting guidance under ASC Topic 810 will
be effective January 1, 2010 and is not expected to have a significant
impact on the Company’s financial statements.
-16-
FASB ASC Topic 815, “Derivatives and
Hedging.” (Formerly
SFAS No. 161) New authoritative accounting guidance under ASC Topic 815,
“Derivatives and Hedging,” amends prior guidance to amend and expand the
disclosure requirements for derivatives and hedging activities to provide
greater transparency about (i) how and why an entity uses derivative
instruments, (ii) how derivative instruments and related hedge items are
accounted for under ASC Topic 815, and (iii) how derivative instruments and
related hedged items affect an entity’s financial position, results of
operations and cash flows. To meet those objectives, the new authoritative
accounting guidance requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value
amounts of gains and losses on derivative instruments and disclosures about
credit-risk-related contingent features in derivative agreements. The new
authoritative accounting guidance under ASC Topic 815 became effective for the
Company on January 1, 2009 and did not have an impact on the Company’s
financial statements.
FASB ASC Topic 820, “Fair Value
Measurements and Disclosures.” (Formerly FSP ASC 820-10-4)
New authoritative accounting guidance under ASC Topic 820,”Fair Value
Measurements and Disclosures,” affirms that the objective of fair value when the
market for an asset is not active is the price that would be received to sell
the asset in an orderly transaction, and clarifies and includes additional
factors for determining whether there has been a significant decrease in market
activity for an asset when the market for that asset is not active. ASC Topic
820 requires an entity to base its conclusion about whether a transaction was
not orderly on the weight of the evidence. The new accounting guidance amended
prior guidance to expand certain disclosure requirements. The Company adopted
the new authoritative accounting guidance under ASC Topic 820 during the second
quarter of 2009 and it did not significantly impact the Company’s financial
statements.
Further new
authoritative accounting guidance (Accounting Standards Update No. 2009-5)
under ASC Topic 820 provides guidance for measuring the fair value of a
liability in circumstances in which a quoted price in an active market for the
identical liability is not available. In such instances, a reporting entity is
required to measure fair value utilizing a valuation technique that uses
(i) the quoted price of the identical liability when traded as an asset,
(ii) quoted prices for similar liabilities or similar liabilities when
traded as assets, or (iii) another valuation technique that is consistent
with the existing principles of ASC Topic 820, such as an income approach or
market approach. The new authoritative accounting guidance also clarifies that
when estimating the fair value of a liability, a reporting entity is not
required to include a separate input or adjustment to other inputs relating to
the existence of a restriction that prevents the transfer of the liability. The
forgoing new authoritative accounting guidance under ASC Topic 820 will be
effective for the Company’s financial statements beginning October 1, 2009
and is not expected to have a significant impact on the Company’s financial
statements.
FASB ASC Topic 825 “Financial
Instruments.”(Formerly SFAS 107-1 and APB 28-1) New authoritative
accounting guidance under ASC Topic 825,”Financial Instruments,” requires an
entity to provide disclosures about the fair value of financial instruments in
interim financial information and amends prior guidance to require those
disclosures in summarized financial information at interim reporting periods.
The new interim disclosures required under Topic 825 are included in Note 11 -
Fair Value Measurements.
FASB ASC Topic 855, “Subsequent
Events.”(Formerly SFAS
No. 165) New authoritative accounting guidance under ASC Topic 855,
“Subsequent Events,” establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. ASC Topic 855 defines
(i) the period after the balance sheet date during which a reporting
entity’s management should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, (ii) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and
(iii) the disclosures an entity should make about events or transactions
that occurred after the balance sheet date. The new authoritative accounting
guidance under ASC Topic 855 became effective for the Company’s financial
statements for periods ending after June 15, 2009 and did not have a
significant impact on the Company’s financial statements.
FASB ASC Topic 860, “Transfers and
Servicing.”(Formerly
SFAS No. 166) New authoritative accounting guidance under ASC Topic 860,
“Transfers and Servicing,” amends prior accounting guidance to enhance reporting
about transfers of financial assets, including securitizations, and where
companies have continuing exposure to the risks related to transferred financial
assets. The new authoritative accounting guidance eliminates the concept of a
“qualifying special-purpose entity” and changes the requirements for
derecognizing financial assets. The new authoritative accounting guidance also
requires additional disclosures about all continuing involvements with
transferred financial assets including information about gains and losses
resulting from transfers during the period. The new authoritative accounting
guidance under ASC Topic 860 will be effective January 1, 2010 and is not
expected to have a significant impact on the Company’s financial
statements.
ASC Topic 105, “Generally Accepted Accounting Principles, (Formerly SFAS No. 168), establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative guidance for SEC registrants. All guidance contained in the Codification carries an equal level of authority. All non-grandfathered, non-SEC accounting literature not included in the Codification is superseded and deemed non-authoritative. ASC Topic 105 will be effective for the Company’s financial statements for the periods ending after September 15, 2009.
-17-
QUARTERLY
FINANCIAL DATA (UNAUDITED)
|
2009
|
2008
|
2007
|
||||||||||||||||||||||||||||||
|
(Dollars
in Thousands, Except Per Share Data)
|
Third
|
Second
|
First
|
Fourth
|
Third(1)
|
Second
|
First
|
Fourth
|
||||||||||||||||||||||||
|
Summary
of Operations:
|
||||||||||||||||||||||||||||||||
|
Interest
Income
|
$ | 30,787 | $ | 31,180 | $ | 31,053 | $ | 33,229 | $ | 34,654 | $ | 36,260 | $ | 38,723 | $ | 40,786 | ||||||||||||||||
|
Interest
Expense
|
4,235 | 4,085 | 4,058 | 5,482 | 7,469 | 8,785 | 12,264 | 13,241 | ||||||||||||||||||||||||
|
Net
Interest Income
|
27,552 | 27,095 | 26,995 | 27,747 | 27,185 | 27,475 | 26,459 | 27,545 | ||||||||||||||||||||||||
|
Provision
for Loan Losses
|
12,347 | 8,426 | 8,410 | 12,497 | 10,425 | 5,432 | 4,142 | 1,699 | ||||||||||||||||||||||||
|
Net
Interest Income After
Provision
for Loan Losses
|
14,205 | 18,669 | 18,585 | 15,250 | 16,760 | 22,043 | 22,317 | 25,846 | ||||||||||||||||||||||||
|
Noninterest
Income
|
14,304 | 14,634 | 14,042 | 13,311 | 20,212 | 15,718 | 17,799 | 15,823 | ||||||||||||||||||||||||
|
Noninterest
Expense
|
31,615 | 32,930 | 32,257 | 31,002 | 29,916 | 30,756 | 29,798 | 31,614 | ||||||||||||||||||||||||
|
Income
Before Provision for Income Taxes
|
(3,106 | ) | 373 | 370 | (2,441 | ) | 7,056 | 7,005 | 10,318 | 10,055 | ||||||||||||||||||||||
|
Provision
for Income Taxes
|
(1,618 | ) | (401 | ) | (280 | ) | (738 | ) | 2,218 | 2,195 | 3,038 | 2,391 | ||||||||||||||||||||
|
Net
Income
|
$ | (1,488 | ) | $ | 774 | $ | 650 | $ | (1,703 | ) | $ | 4,838 | $ | 4,810 | $ | 7,280 | $ | 7,664 | ||||||||||||||
|
Net
Interest Income (FTE)
|
$ | 27,128 | $ | 27,679 | $ | 27,578 | $ | 28,387 | $ | 27,802 | $ | 28,081 | $ | 27,078 | $ | 28,196 | ||||||||||||||||
|
Per
Common Share:
|
||||||||||||||||||||||||||||||||
|
Net
Income Basic
|
$ | (0.08 | ) | $ | 0.04 | $ | 0.04 | $ | (0.10 | ) | $ | 0.29 | $ | 0.28 | $ | 0.42 | $ | 0.44 | ||||||||||||||
|
Net
Income Diluted
|
(0.08 | ) | 0.04 | 0.04 | (0.10 | ) | 0.29 | 0.28 | 0.42 | 0.44 | ||||||||||||||||||||||
|
Dividends
Declared
|
0.190 | 0.190 | 0.190 | 0.190 | 0.185 | 0.185 | 0.185 | 0.185 | ||||||||||||||||||||||||
|
Diluted
Book Value
|
15.76 | 16.03 | 16.18 | 16.27 | 17.45 | 17.33 | 17.33 | 17.03 | ||||||||||||||||||||||||
|
Market
Price:
|
||||||||||||||||||||||||||||||||
|
High
|
17.10 | 17.35 | 27.31 | 33.32 | 34.50 | 30.19 | 29.99 | 34.00 | ||||||||||||||||||||||||
|
Low
|
13.92 | 11.01 | 9.50 | 21.06 | 19.20 | 21.76 | 24.76 | 24.60 | ||||||||||||||||||||||||
|
Close
|
14.20 | 16.85 | 11.46 | 27.24 | 31.35 | 21.76 | 29.00 | 28.22 | ||||||||||||||||||||||||
|
Selected
Average
|
||||||||||||||||||||||||||||||||
|
Balances:
|
||||||||||||||||||||||||||||||||
|
Loans
|
$ | 1,964,984 | $ | 1,974,197 | $ | 1,964,086 | $ | 1,940,083 | $ | 1,915,008 | $ | 1,908,802 | $ | 1,909,574 | $ | 1,908,069 | ||||||||||||||||
|
Earning
Assets
|
2,157,362 | 2,175,281 | 2,166,237 | 2,150,841 | 2,207,670 | 2,303,971 | 2,301,463 | 2,191,230 | ||||||||||||||||||||||||
|
Assets
|
2,497,969 | 2,506,352 | 2,486,925 | 2,463,318 | 2,528,638 | 2,634,771 | 2,646,474 | 2,519,682 | ||||||||||||||||||||||||
|
Deposits
|
1,950,170 | 1,971,190 | 1,957,354 | 1,945,866 | 2,030,684 | 2,140,545 | 2,148,874 | 2,016,736 | ||||||||||||||||||||||||
|
Shareowners’
Equity
|
275,027 | 277,114 | 281,634 | 302,227 | 303,595 | 300,890 | 296,804 | 299,342 | ||||||||||||||||||||||||
|
Common
Equivalent Shares:
|
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