Since 2009, our assessment
rates, which also include our assessment for participating in the FDICs
Transaction Account Guarantee Program, have increased significantly.
Additionally, on May 22, 2009, the FDIC announced a final rule imposing a
special 5 basis point emergency assessment as of June 30, 2009, payable
September 30, 2009, based on assets minus Tier I Capital at June 30, 2009, but
the amount of the assessment was capped at 10.00 basis points of domestic
deposits. Finally, on November 12, 2009, the FDIC adopted a new rule requiring
insured institutions to prepay on December 30, 2009, estimated quarterly
risk-based assessments for the fourth quarter of 2009 and for all of 2010,
2011, and 2012. We prepaid an assessment of $11.5 million, which incorporated a
uniform 3.00 basis point increase effective January 1, 2011.
These higher FDIC assessment
rates and special assessments have had and will continue to have an adverse
impact on our results of operations. Our FDIC insurance related cost was $3.8
million for the year ended December 31, 2011 compared to $0.8 million for the
year ended December 31, 2008. We are unable to predict the impact in future
periods, including whether and when additional special assessments will occur.
The Dodd-Frank Act also
amended the Federal Deposit Insurance Act changing the base against which an
insured depository institutions deposit insurance assessment is calculated.
These amendments require the appropriate assessment base to be calculated as
the institutions average consolidated total assets minus average tangible
equity, rather than the institutions deposits. The FDICs implementing
regulation for these amendments became effective for the quarter beginning
April 1, 2011 and was reflected in invoices for assessments due September 30,
2011. These developments have caused, and may cause in the future, an increase
to our assessments, and the FDIC may be required to make additional increases
to the assessment rates and levy additional special assessments on us.
Higher insurance premiums
and assessments increase our costs and may limit our ability to pursue certain
business opportunities. We also may be required to pay even higher FDIC
premiums than the recently increased level, because financial institution
failures resulting from the depressed market conditions have depleted and may
continue to deplete the deposit insurance fund and reduce its ratio of reserves
to insured deposits.
We are subject to extensive regulation that could restrict
our activities and impose financial requirements or limitations on the conduct
of our business.
The Bank is subject to
extensive regulation, supervision and examination by the Florida Office of
Financial Regulation, the Federal Reserve, and the FDIC. Our compliance with
these industry regulations is costly and restricts certain of our activities,
including payment of dividends, mergers and acquisitions, investments, loans
and interest rates charged, interest rates paid on deposits, access to capital
and brokered deposits and locations of banking offices. In addition, please see
Item 1. BusinessAbout UsRegulatory Matter for a discussion regarding the
Federal Reserve Resolutions. If we are unable to meet these regulatory
requirements, our financial condition, liquidity and results of operations
would be materially and adversely affected.
The Bank must also meet
regulatory capital requirements imposed by our regulators. An inability to meet
these capital requirements would result in numerous mandatory supervisory
actions and additional regulatory restrictions, and could have a negative
impact on our financial condition, liquidity and results of operations.
In addition to the
regulations of the Florida Office of Financial Regulation, the Federal Reserve,
and the FDIC, as a member of the Federal Home Loan Bank, the Bank must also
comply with applicable regulations of the Federal Housing Finance Agency and
the Federal Home Loan Bank.
The Banks activities are
also regulated under consumer protection laws applicable to our lending,
deposit and other activities. In addition, the Dodd-Frank Act imposes
significant additional regulation on our operations. Regulation by all of these
agencies is intended primarily for the protection of our depositors and the
Deposit Insurance Fund and not for the benefit of our shareowners. Our failure
to comply with these laws and regulations, even if the failure follows good
faith effort or reflects a difference in interpretation, could subject us to
restrictions on our business activities, fines and other penalties, any of
which could adversely affect our results of operations, capital base and the
price of our securities. Further, any new laws, rules and regulations could
make compliance more difficult or expensive or otherwise adversely affect our
business and financial condition. Please refer to the Section entitled
Business Regulatory Considerations in this Report.
We may be subject to more stringent capital and liquidity
requirements which would adversely affect our net income and future growth.
The Dodd-Frank Act applies
the same leverage and risk-based capital requirements that apply to insured
depository institutions to most bank holding companies, which, among other
things, will change the way in which hybrid securities, such as trust preferred
securities, are treated for purposes of determining a bank holding companys
regulatory capital. On June 14, 2011, the federal banking agencies published a
final rule regarding minimum leverage and risk-based capital requirements for
banks and bank holding companies consistent with the requirements of Section
171 of the Dodd-Frank Act. For a more detailed description of the minimum
capital requirements see Regulatory Considerations The Bank Capital
Regulations. The Dodd-Frank Act also increased regulatory oversight,
supervision and examination of banks, bank holding companies and their
respective subsidiaries by the appropriate regulatory agency. These
requirements, and any other new regulations, could adversely affect our ability
to pay
26
dividends, or could require
us to reduce business levels or to raise capital, including in ways that may
adversely affect our results of operations or financial condition.
In addition, on September
12, 2010, the Group of Governors and Heads of Supervision, the oversight body
of the Basel Committee on Banking Supervision, announced agreement on the
calibration and phase-in arrangements for a strengthened set of capital
requirements, known as Basel III. On December 20, 2011, the Federal Reserve
announced its intention to implement substantially all of the Basel III rules
which would generally be applicable to institutions with greater than $50
billion in assets. Banking regulators could implement additional changes to the
capital adequacy standards applicable to us and the Bank in the future.
When fully phased in, Basel
III will introduce a minimum Tier I common equity ratio of 4.5%, net of
regulatory deductions, and establish a capital conservation buffer of an
additional 2.5% of common equity to risk-weighted assets above the regulatory
minimum capital requirement, establishing a minimum common equity ratio plus
capital conservation buffer at 7%. This capital conservation buffer will impose
capital distribution constraints when the Tier I capital ratio falls under 8.5%
and the total capital ratio falls under 10.5%. In addition, Basel III
introduces a countercyclical capital buffer of up to 2.5% of common equity or
other loss absorbing capital above the regulatory capital minimum plus the
capital conservation buffer for periods of excess credit growth. Basel III also
introduces a non-risk adjusted Tier I leverage ratio based on a measure of
total exposure rather than total assets, and new liquidity standards. The Basel
III capital and liquidity standards will be phased in over a period of several
years. The text of the final Basel III capital and liquidity rules was
published on December 16, 2010, and is now subject to individual adoption by
member nations, including the United States.
Future increases in minimum
capital requirements could adversely affect our net income. Furthermore, our
failure to comply with the minimum capital requirements could result in our
regulators taking formal or informal actions against us which could restrict
our future growth or operations.
Florida financial institutions, such as the Bank, face a
higher risk of noncompliance and enforcement actions with the Bank Secrecy Act
and other anti-money laundering statutes and regulations.
Since September 11, 2001,
banking regulators have intensified their focus on anti-money laundering and
Bank Secrecy Act compliance requirements, particularly the anti-money
laundering provisions of the USA PATRIOT Act. There is also increased scrutiny
of compliance with the rules enforced by the Office of Foreign Assets Control
(OFAC). Since 2004, federal banking regulators and examiners have been
extremely aggressive in their supervision and examination of financial
institutions located in the State of Florida with respect to the institutions
Bank Secrecy Act/Anti-Money Laundering compliance. Consequently, numerous
formal enforcement actions have been issued against financial institutions.
In order to comply with
regulations, guidelines and examination procedures in this area, the Bank has
been required to adopt new policies and procedures and to install new systems.
If the Banks policies, procedures and systems are deemed deficient or the
policies, procedures and systems of the financial institutions that it has
already acquired or may acquire in the future are deficient, the Bank would be
subject to liability, including fines and regulatory actions such as
restrictions on its ability to pay dividends and the necessity to obtain
regulatory approvals to proceed with certain aspects of its business plan,
including its acquisition plans.
Risks Related to Market Events
Our loan portfolio is heavily concentrated in mortgage loans
secured by properties in Florida and Georgia which heightens our risk of loss
than if we had a more geographically diversified portfolio.
Our interest-earning assets
are heavily concentrated in mortgage loans secured by real estate, particularly
real estate located in Florida and Georgia. As of December 31, 2011,
approximately 80.4% of our loans had real estate as a primary, secondary, or
tertiary component of collateral. The real estate collateral in each case
provides an alternate source of repayment in the event of default by the
borrower; however, the value of the collateral may decline during the time the
credit is extended. If we are required to liquidate the collateral securing a
loan during a period of reduced real estate values, such as in todays market,
to satisfy the debt, our earnings and capital could be adversely affected.
Additionally, as of December
31, 2011, substantially all of our loans secured by real estate are secured by
commercial and residential properties located in Northern Florida and Middle
Georgia. The concentration of our loans in this area subjects us to risk that a
downturn in the economy or recession in those areas, such as the one the areas
are currently experiencing, could result in a decrease in loan originations and
increases in delinquencies and foreclosures, which would more greatly affect us
than if our lending were more geographically diversified. In addition, since a
large portion of our portfolio is secured by properties located in Florida and
Georgia, the occurrence of a natural disaster, such as a hurricane, or a
man-made disaster could result in a decline in loan originations, a decline in
the value or destruction of mortgaged properties and an increase in the risk of
delinquencies, foreclosures or loss on loans originated by us. We may suffer
further losses due to the decline in the value of the properties underlying our
mortgage loans, which would have an adverse impact on our results of operations
and financial condition.
27
Our concentration in loans secured by real estate may
increase our credit losses, which would negatively affect our financial
results.
Due to the lack of
diversified industry within the markets served by the Bank and the relatively
close proximity of our geographic markets, we have both geographic
concentrations as well as concentrations in the types of loans funded.
Specifically, due to the nature of our markets, a significant portion of the
portfolio has historically been secured with real estate. As of December 31,
2011, approximately 39.2% and 39.5% of our $1.629 billion loan portfolio was
secured by commercial real estate and residential real estate, respectively. As
of this same date, approximately 1.6% was secured by property under
construction.
The current downturn in the
real estate market, the deterioration in the value of collateral, and the local
and national economic recessions, have adversely affected our clients ability
to repay their loans. If these conditions persist, or get worse, our clients
ability to repay their loans will be further eroded. In the event we are
required to foreclose on a property securing one of our mortgage loans or
otherwise pursue our remedies in order to protect our investment, we may be
unable to recover funds in an amount equal to our projected return on our
investment or in an amount sufficient to prevent a loss to us due to prevailing
economic conditions, real estate values and other factors associated with the
ownership of real property. As a result, the market value of the real estate or
other collateral underlying our loans may not, at any given time, be sufficient
to satisfy the outstanding principal amount of the loans, and consequently, we
would sustain loan losses.
Future economic growth in our Florida market area is likely
to be slower compared to previous years.
The State of Floridas
population growth has historically exceeded national averages. Consequently,
the state has experienced substantial growth in population, new business
formation, and public works spending. Due to the moderation of economic growth
and migration into our market area and the downturn in the real estate market,
management believes that growth in our market area will be restrained in the
near term. We have experienced an overall slowdown in the origination of
residential mortgage loans recently due to the slowing in residential real
estate sales activity in our markets. A decrease in existing and new home sales
decreases lending opportunities and negatively affects our income.
Additionally, if property values continue to decline, this could lead to
additional valuation adjustments on our loan portfolios.
The fair value of our investments could decline which would
cause a reduction in shareowners equity.
Our investment securities
portfolio as of December 31, 2011 has been designated as available-for-sale
pursuant to U.S. generally accepted accounting principles relating to
accounting for investments. Such principles require that unrealized gains and
losses in the estimated value of the available-for-sale portfolio be marked to
market and reflected as a separate item in shareowners equity (net of tax) as
accumulated other comprehensive income/loss. At December 31, 2011, we
maintained all of our investment securities in the available-for-sale
classification.
Shareowners equity will
continue to reflect the unrealized gains and losses (net of tax) of these
investments. The fair value of our investment portfolio may decline, causing a
corresponding decline in shareowners equity.
Management believes that
several factors will affect the fair values of our investment portfolio. These
include, but are not limited to, changes in interest rates or expectations of
changes, the degree of volatility in the securities markets, inflation rates or
expectations of inflation and the slope of the interest rate yield curve (the
yield curve refers to the differences between shorter-term and longer-term
interest rates; a positively sloped yield curve means shorter-term rates are
lower than longer-term rates). These and other factors may impact specific
categories of the portfolio differently, and we cannot predict the effect these
factors may have on any specific category.
Concerns of clients over deposit insurance may cause a
decrease in our deposits which would increase our funding costs and adversely
affect our net income.
With increased concerns
about bank failures, clients are increasingly concerned about the extent to
which their deposits are insured by the FDIC. Clients may withdraw deposits
from the Bank in an effort to ensure that the amount that they have on deposit
at the Bank is fully insured. Decreases in deposits may adversely affect our
funding costs and net income.
28
Risks Related to an Investment in Our Common Stock
We may be unable to pay dividends in the future.
On December 14, 2011, we
announced the suspension of our quarterly dividend on our common stock. We
believe that, given our inability to earn our dividend since 2008, it was, and
continues to be, prudent to preserve our capital at least until the economic
conditions in Florida and Georgia improve. In addition, in consultation with
the Federal Reserve, we have agreed to defer the payment of interest on the
Companys trust preferred securities and to maintain the suspension of our
quarterly dividend on our common stock until asset quality and the level of
credit risk exposure improve. See Item 1. Business-About-Us-Regulatory Matter.
Due to our contractual obligations with the
holders of the trust preferred securities, we may not make dividend payments to
our shareowners in the future until all accrued and unpaid interest owed to
trust preferred securities holders is paid. Therefore, we cannot pay dividends
to our shareowners until we (i) obtain approval from our regulators to pay
interest on our trust preferred securities, (ii) pay all accrued and unpaid
interest owed to holders of our trust preferred securities, and (iii) obtain
approval from our regulators to pay dividends to our shareowners. We remain
committed to resuming dividend payments to our shareowners and interest on our
trust preferred securities as soon as conditions warrant, and subject to
approval from our regulators, which approval may not be granted until such time
as CCBs asset quality and the level of credit risk exposure improve.
Further, under applicable
statutes and regulations, the Banks board of directors, after charging off bad
debts, depreciation and other worthless assets, if any, and making provisions
for reasonably anticipated future losses on loans and other assets, may
quarterly, semi-annually, or annually declare and pay dividends to CCBG of up
to the aggregate net income of that period combined with the Banks retained
net income for the preceding two years and, with the approval of the Florida
Office of Financial Regulation and Federal Reserve, declare a dividend from
retained net income which accrued prior to the preceding two years. Under the
aforementioned guidelines and restrictions, the Bank cannot declare or pay
dividends to CCBG without the required approvals.
Limited trading activity for shares of our common stock may
contribute to price volatility.
While our common stock is
listed and traded on The NASDAQ Global Select Market, there has been limited
trading activity in our common stock. The average daily trading volume of our
common stock over the twelve-month period ending December 31, 2011 was
approximately 32,096 shares. Due to the limited trading activity of our common
stock, relativity small trades may have a significant impact on the price of
our common stock.
Securities analysts may not initiate coverage or continue to
cover our common stock, and this may have a negative impact on its market
price.
The trading market for our
common stock will depend in part on the research and reports that securities
analysts publish about our business and our Company. We do not have any control
over these securities analysts and they may not initiate coverage or continue
to cover our common stock. If securities analysts do not cover our common
stock, the lack of research coverage may adversely affect its market price. If
we are covered by securities analysts, and our common stock is the subject of
an unfavorable report, our stock price would likely decline. If one or more of
these analysts ceases to cover our Company or fails to publish regular reports
on us, we could lose visibility in the financial markets, which may cause our
stock price or trading volume to decline.
29
Our directors, executive officers, and
principal shareowners, if acting together, have substantial control over all
matters requiring shareowner approval, including changes of control. Because
Mr. William G. Smith, Jr. is a principal shareowner and our Chairman,
President, and Chief Executive Officer and Chairman of the Bank, he has
substantial control over all matters on a day to day basis.
Our directors, executive
officers, and principal shareowners beneficially owned approximately 41% of the
outstanding shares of our common stock as of December 31, 2011. Our principal
shareowners include Robert H. Smith who beneficially owns 20.3% of our shares
and who is the brother of William G. Smith, Jr., our Chairman, President, and
Chief Executive Officer. William G. Smith, Jr. beneficially owns 21.9% of our
shares. In addition, 2S Partnership beneficially owns 6.1% of our shares,
however, its shares are also deemed to be beneficially owned by Messrs. Smith
and Smith. Together, Messrs. Smith and Smith beneficially own 34.2% of our
shares.
Accordingly, these
directors, executive officers, and principal shareowners, if acting together,
may be able to influence or control matters requiring approval by our
shareowners, including the election of directors and the approval of mergers,
acquisitions or other extraordinary transactions. In addition, because William
G. Smith, Jr. is the Chairman, President, and Chief Executive Officer of CCBG
and Chairman of the Bank, he has substantial control over all matters on a day
to day basis, including the nomination and election of directors.
These directors, executive
officers, and principal shareowners may also have interests that differ from
yours and may vote in a way with which you disagree and which may be adverse to
your interests. The concentration of ownership may have the effect of delaying,
preventing or deterring a change of control of our company, could deprive our
shareowners of an opportunity to receive a premium for their common stock as
part of a sale of our company and might ultimately affect the market price of
our common stock. You may also have difficulty changing management, the
composition of the Board of Directors, or the general direction of our Company.
Our Articles of Incorporation, Bylaws, and certain laws and
regulations may prevent or delay transactions you might favor, including a sale
or merger of CCBG.
CCBG is registered with the
Federal Reserve as a bank holding company under the Bank Holding Company Act
(BHCA). As a result, we are subject to supervisory regulation and examination
by the Federal Reserve. The Gramm-Leach-Bliley Act, the BHCA, and other federal
laws subject bank holding companies to particular restrictions on the types of
activities in which they may engage, and to a range of supervisory requirements
and activities, including regulatory enforcement actions for violations of laws
and regulations.
Provisions of our Articles
of Incorporation, Bylaws, certain laws and regulations and various other
factors may make it more difficult and expensive for companies or persons to
acquire control of us without the consent of our Board of Directors. It is
possible, however, that you would want a takeover attempt to succeed because,
for example, a potential buyer could offer a premium over the then prevailing
price of our common stock.
For example, our Articles of
Incorporation permit our Board of Directors to issue preferred stock without
shareowner action. The ability to issue preferred stock could discourage a
company from attempting to obtain control of us by means of a tender offer,
merger, proxy contest or otherwise. Additionally, our Articles of Incorporation
and Bylaws divide our Board of Directors into three classes, as nearly equal in
size as possible, with staggered three-year terms. One class is elected each
year. The classification of our Board of Directors could make it more difficult
for a company to acquire control of us. We are also subject to certain
provisions of the Florida Business Corporation Act and our Articles of
Incorporation that relate to business combinations with interested shareowners.
Other provisions in our Articles of Incorporation or Bylaws that may discourage
takeover attempts or make them more difficult include:
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§
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Supermajority voting
requirements to remove a director from office;
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§
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Provisions regarding the
timing and content of shareowner proposals and nominations;
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§
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Supermajority voting
requirements to amend Articles of Incorporation unless approval is received
by a majority of disinterested directors;
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§
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Absence of cumulative
voting; and
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§
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Inability for shareowners
to take action by written consent.
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Shares of our common stock are not an insured deposit and may
lose value.
The shares of our common
stock are not a bank deposit and will not be insured or guaranteed by the FDIC
or any other government agency. Your investment will be subject to investment
risk, and you must be capable of affording the loss of your entire investment.
30
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I
tem 1B.
|
Unresolved Staff Comments
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None.
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I
tem 2.
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Properties
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We are headquartered in
Tallahassee, Florida. Our executive office is in the Capital City Bank
building located on the corner of Tennessee and Monroe Streets in downtown
Tallahassee. The building is owned by the Bank, but is located on land leased
under a long-term agreement.
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As of February 29, 2012,
the Bank had 70 banking locations. Of the 70 locations, the Bank leases the
land, buildings, or both at 9 locations and owns the land and buildings at
the remaining 61.
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I
tem 3.
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Legal Proceedings
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We are party to lawsuits
and claims arising out of the normal course of business. In managements
opinion, there are no known pending claims or litigation, the outcome of
which would, individually or in the aggregate, have a material effect on our
consolidated results of operations, financial position, or cash flows.
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I
tem 4.
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Mine Safety Disclosures.
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Not applicable.
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P
ART II
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I
tem 5.
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Market for the Registrants Common Equity, Related
Shareowner Matters, and Issuer Purchases of Equity Securities
|
Common Stock Market Prices and Dividends
Our common stock trades on
the NASDAQ Global Select Market under the symbol CCBG.
The following table presents
the range of high and low closing sales prices reported on the NASDAQ Global
Select Market and cash dividends declared for each quarter during the past two
years. We had a total of 1,701 shareowners of record as of March 1, 2012.
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2011
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2010
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Fourth
Quarter
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Third
Quarter
|
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Second
Quarter
|
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First
Quarter
|
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Fourth
Quarter
|
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Third
Quarter
|
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Second
Quarter
|
|
First
Quarter
|
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Common stock price:
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High
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$
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11.11
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$
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11.18
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$
|
13.12
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$
|
13.80
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$
|
14.19
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|
$
|
14.24
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$
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18.25
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$
|
14.61
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Low
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|
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9.43
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|
|
9.81
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|
|
9.84
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|
|
11.87
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|
|
11.56
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|
|
10.76
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|
12.36
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|
|
11.57
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Close
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|
|
9.55
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|
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10.38
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|
10.26
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|
|
12.68
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12.60
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12.14
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12.38
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14.25
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Cash dividends per share
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|
|
0.00
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|
0.10
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|
|
0.10
|
|
|
0.10
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|
|
0.10
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|
|
0.10
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|
|
0.10
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|
|
0.19
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|
Florida law and Federal regulations limit the
amount of dividends that the Bank can pay annually to us. Pursuant to the
Federal Reserve Resolutions, without prior approval, CCBG is prohibited from
paying dividends to shareowners and CCB is prohibited from paying dividends to
CCBG. See Item 1. Business-About-Us-Regulatory Matter. In addition, see
further dividend restrictions in the subsection
entitled Capital; Dividends; Sources of Strength and Dividends in the
Business section on page 15 and the section entitled Liquidity and Capital
Resources Dividends -- in Managements Discussion and Analysis of Financial
Condition and Operating Results on page 57 and Note 15 in the Notes to
Consolidated Financial Statements.
31
Performance Graph
This performance graph
compares the cumulative total shareholder return on our common stock with the
cumulative total shareholder return of the NASDAQ Composite Index and the SNL
Financial LC $1B-$5B Bank Index for the past five years. The graph assumes that
$100 was invested on December 31, 2006 in our common stock and each of the
above indices, and that all dividends were reinvested. The shareholder return
shown below represents past performance and should not be considered indicative
of future performance.
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|
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Period Ending
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Index
|
|
12/31/06
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12/31/07
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12/31/08
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12/31/09
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12/31/10
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12/31/11
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Capital City Bank Group, Inc.
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$
|
100.00
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$
|
81.84
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|
$
|
81.31
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|
$
|
43.84
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$
|
41.44
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$
|
32.28
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|
NASDAQ Composite
|
|
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100.00
|
|
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110.66
|
|
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66.42
|
|
|
96.54
|
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|
114.06
|
|
|
113.16
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SNL $1B-$5B Bank Index
|
|
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100.00
|
|
|
72.84
|
|
|
60.42
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|
|
43.31
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|
|
49.09
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|
|
44.77
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32
|
|
I
tem 6.
|
Selected Financial Data
|
|
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|
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For the Years Ended December 31,
|
|
(Dollars
in Thousands, Except Per Share Data
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
Interest Income
|
|
$
|
99,459
|
|
$
|
110,495
|
|
$
|
122,776
|
|
$
|
142,866
|
|
$
|
165,323
|
|
Net Interest Income
|
|
|
91,922
|
|
|
97,533
|
|
|
105,934
|
|
|
108,866
|
|
|
112,241
|
|
Provision for Loan Losses
|
|
|
18,996
|
|
|
23,824
|
|
|
40,017
|
|
|
32,496
|
|
|
6,163
|
|
Noninterest Income
|
|
|
58,848
|
|
|
56,825
|
|
|
57,391
|
|
|
67,040
|
|
|
59,300
|
|
Noninterest Expense
|
|
|
126,248
|
|
|
133,916
|
|
|
132,115
|
|
|
121,472
|
|
|
121,992
|
|
Net Income (Loss)
|
|
|
4,897
|
|
|
(413
|
)
|
|
(3,471
|
)
|
|
15,225
|
|
|
29,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Net Income (Loss)
|
|
$
|
0.29
|
|
$
|
(0.02
|
)
|
$
|
(0.20
|
)
|
$
|
0.89
|
|
$
|
1.66
|
|
Diluted Net Income (Loss)
|
|
|
0.29
|
|
|
(0.02
|
)
|
|
(0.20
|
)
|
|
0.89
|
|
|
1.66
|
|
Cash Dividends Declared
|
|
|
0.30
|
|
|
0.49
|
|
|
0.76
|
|
|
0.74
|
|
|
0.71
|
|
Diluted Book Value
|
|
|
14.68
|
|
|
15.15
|
|
|
15.72
|
|
|
16.27
|
|
|
17.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Average Assets
|
|
|
0.19
|
%
|
|
(0.02
|
)%
|
|
(0.14
|
)%
|
|
0.59
|
%
|
|
1.18
|
%
|
Return on Average Equity
|
|
|
1.86
|
|
|
(0.16
|
)
|
|
(1.26
|
)
|
|
5.06
|
|
|
9.68
|
|
Net Interest Margin (FTE)
|
|
|
4.18
|
|
|
4.32
|
|
|
4.96
|
|
|
4.96
|
|
|
5.25
|
|
Noninterest Income as % of Operating
Revenues
|
|
|
39.13
|
|
|
36.81
|
|
|
35.14
|
|
|
38.11
|
|
|
34.57
|
|
Efficiency Ratio
|
|
|
82.79
|
|
|
84.23
|
|
|
77.33
|
|
|
64.91
|
|
|
66.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
$
|
31,035
|
|
$
|
35,436
|
|
$
|
43,999
|
|
$
|
37,004
|
|
$
|
18,066
|
|
Allowance for Loan Losses to Loans
|
|
|
1.91
|
%
|
|
2.01
|
%
|
|
2.30
|
%
|
|
1.89
|
%
|
|
0.95
|
%
|
Nonperforming Assets
|
|
|
137,623
|
|
|
123,637
|
|
|
122,408
|
|
|
106,098
|
|
|
28,162
|
|
Nonperforming Assets to Assets
|
|
|
5.21
|
|
|
4.72
|
|
|
4.52
|
|
|
4.26
|
|
|
1.08
|
|
Nonperforming Assets to Loans + OREO
|
|
|
8.14
|
|
|
6.81
|
|
|
6.27
|
|
|
5.39
|
|
|
1.47
|
|
Allowance to Nonperforming Loans
|
|
|
41.37
|
|
|
53.94
|
|
|
51.00
|
|
|
38.20
|
|
|
71.92
|
|
Net Charge-Offs to Average Loans
|
|
|
1.39
|
|
|
1.77
|
|
|
1.66
|
|
|
0.71
|
|
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I Capital
|
|
|
13.96
|
%
|
|
13.24
|
%
|
|
12.76
|
%
|
|
13.34
|
%
|
|
13.05
|
%
|
Total Capital
|
|
|
15.32
|
|
|
14.59
|
|
|
14.11
|
|
|
14.69
|
|
|
14.05
|
|
Tangible Capital
|
|
|
6.51
|
|
|
6.82
|
|
|
6.84
|
|
|
7.76
|
|
|
7.71
|
|
Leverage
|
|
|
10.26
|
|
|
10.10
|
|
|
10.39
|
|
|
11.51
|
|
|
10.83
|
|
Equity to Assets
|
|
|
9.54
|
|
|
9.88
|
|
|
9.89
|
|
|
11.20
|
|
|
11.19
|
|
Dividend Pay-Out
|
|
|
103.45
|
|
|
NM
|
|
|
NM
|
|
|
83.71
|
|
|
42.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Averages for the Year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, Net
|
|
$
|
1,686,995
|
|
$
|
1,829,193
|
|
$
|
1,961,990
|
|
$
|
1,918,417
|
|
$
|
1,934,850
|
|
Earning Assets
|
|
|
2,221,317
|
|
|
2,294,282
|
|
|
2,184,232
|
|
|
2,240,649
|
|
|
2,183,528
|
|
Total Assets
|
|
|
2,583,197
|
|
|
2,644,731
|
|
|
2,516,815
|
|
|
2,567,905
|
|
|
2,507,217
|
|
Deposits
|
|
|
2,081,583
|
|
|
2,192,323
|
|
|
1,992,429
|
|
|
2,066,065
|
|
|
1,990,446
|
|
Shareowners Equity
|
|
|
263,048
|
|
|
264,679
|
|
|
275,545
|
|
|
300,890
|
|
|
306,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-End Balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, Net
|
|
$
|
1,628,683
|
|
$
|
1,758,671
|
|
$
|
1,915,940
|
|
$
|
1,957,797
|
|
$
|
1,915,850
|
|
Earning Assets
|
|
|
2,266,193
|
|
|
2,269,185
|
|
|
2,369,029
|
|
|
2,156,172
|
|
|
2,272,829
|
|
Total Assets
|
|
|
2,641,312
|
|
|
2,622,053
|
|
|
2,708,324
|
|
|
2,488,699
|
|
|
2,616,327
|
|
Deposits
|
|
|
2,172,519
|
|
|
2,103,976
|
|
|
2,258,234
|
|
|
1,992,174
|
|
|
2,142,344
|
|
Shareowners Equity
|
|
|
251,492
|
|
|
259,019
|
|
|
267,899
|
|
|
278,830
|
|
|
292,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Average Shares Outstanding
|
|
|
17,139,558
|
|
|
17,075,867
|
|
|
17,043,964
|
|
|
17,141,454
|
|
|
17,909,396
|
|
Diluted Average Shares Outstanding
|
|
|
17,140,390
|
|
|
17,076,724
|
|
|
17,044,711
|
|
|
17,146,914
|
|
|
17,911,587
|
|
Shareowners of Record(1)
|
|
|
1,701
|
|
|
1,768
|
|
|
1,778
|
|
|
1,756
|
|
|
1,750
|
|
Banking Locations(1)
|
|
|
70
|
|
|
70
|
|
|
70
|
|
|
68
|
|
|
70
|
|
Full-Time Equivalent Associates(1)
|
|
|
959
|
|
|
975
|
|
|
1,006
|
|
|
1,042
|
|
|
1,097
|
|
|
|
(1)
|
As of record
date. The record date is on or about March 1
st
of the following
year.
|
|
NM Not
Meaningful
|
33
|
|
Item 7.
|
M
anagements
Discussion and Analysis of Financial Condition and Results of Operations
|
Managements
discussion and analysis (MD&A) provides supplemental information, which
sets forth the major factors that have affected our financial condition and
results of operations and should be read in conjunction with the Consolidated
Financial Statements and related notes included in the Annual Report on Form
10-K. The MD&A is divided into subsections entitled Business Overview,
Executive Overview, Results of Operations, Financial Condition,
Liquidity and Capital Resources, Off-Balance Sheet Arrangements, Fourth
Quarter, 2011 Financial Results, and Accounting Policies. The following
information should provide a better understanding of the major factors and
trends that affect our earnings performance and financial condition, and how
our performance during 2011 compares with prior years. Throughout this section,
Capital City Bank Group, Inc., and its subsidiary, collectively, are referred
to as CCBG, Company, we, us, or our.
In this
MD&A, we present an operating efficiency ratio which is not calculated
based on accounting principles generally accepted in the United States
(GAAP), but that we believe provides important information regarding our
results of operations. Our calculation of the operating efficiency ratio is
computed by dividing noninterest expense less intangible amortization and
merger expenses, by the sum of tax equivalent net interest income and
noninterest income. Management uses this non-GAAP measure as part of its
assessment of its performance in managing noninterest expenses. We believe that
excluding intangible amortization and merger expenses in our calculations
better reflects our periodic expenses and is more reflective of normalized
operations.
Although we
believe the above-mentioned non-GAAP financial measure enhances investors
understanding of our business and performance this non-GAAP financial measure
should not be considered an alternative to GAAP. In addition, there are
material limitations associated with the use of this non-GAAP financial measure
such as the risks that readers of our financial statements may disagree as to
the appropriateness of items included or excluded in this measure and that our
measure may not be directly comparable to other companies that calculate this
measure differently. Our management compensates for this limitation by providing
a detailed reconciliation between GAAP information and the non-GAAP financial
measure as detailed below.
Reconciliation
of operating efficiency ratio to efficiency ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Years Ended December 31,
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Efficiency ratio
|
|
|
83.22
|
%
|
|
85.95
|
%
|
|
79.77
|
%
|
Effect of intangible amortization and
merger expenses
|
|
|
(0.43
|
)
|
|
(1.72
|
)
|
|
(2.44
|
)
|
Operating efficiency ratio
|
|
|
82.79
|
%
|
|
84.23
|
%
|
|
77.33
|
%
|
34
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This Annual
Report on Form 10-K, including this MD&A section, 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. Please see the Introductory Note and
Item 1A Risk
Factors
of this Annual Report for a discussion of factors that could cause our
actual results to differ materially from those in the forward-looking
statements.
However, other
factors besides those listed in
Item 1A Risk Factors
or discussed in this
Annual Report 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.
BUSINESS OVERVIEW
Our Business
We are a bank
holding company headquartered in Tallahassee, Florida, and we are the parent of
our wholly-owned subsidiary, Capital City Bank (the Bank or CCB). The Bank
offers a broad array of products and services through a total of 70
full-service offices located in Florida, Georgia, and Alabama. The Bank offers
commercial and retail banking services, as well as trust and asset management,
retail securities brokerage and data processing services.
Our profitability,
like most financial institutions, is dependent to a large extent upon net
interest income, which is the difference between the interest received on
earning assets, such as loans and securities, and the interest paid on
interest-bearing liabilities, principally deposits and borrowings. Results of
operations are also affected by the provision for loan losses, operating
expenses such as salaries and employee benefits, occupancy and other operating
expenses including income taxes, and noninterest income such as service charges
on deposit accounts, asset management and trust fees, retail securities
brokerage fees, mortgage banking fees, bank card fees, and data processing
fees.
Much of our
lending operations, approximately 78%, are within the State of Florida, which
has been particularly hard hit by the current economic recession. Furthermore,
approximately 80% of our loan portfolio has real estate as the primary
collateral, approximately 40% of which is secured by residential real estate.
Evidence of the economic downturn in Florida is particularly reflected in
recent unemployment statistics and realization of real estate property
devaluation. According to data from the U.S. Department of Labor, the Florida
unemployment rate (seasonally adjusted) at December 2011 was 9.9% which is
above the national average of 8.5%, but reflects an improvement over Floridas
unemployment rate of 12.0% at the end of 2010. The level of unemployment, as
well as wealth reduction due to depressed markets, has adversely affected our
market areas as evidenced by layoffs and business closings. Florida has also
realized an increasing trend in the number of bankruptcy filings since 2007
with the most significant being non-business bankruptcy filings. During 2011,
this trend reversed as total filings declined by approximately 10%.
Based on data
from the U.S. Census Bureau, from 2006 through the end of 2010, median
household income decreased by 3.1% in Florida. Additionally, real estate
property valuations have declined and remained depressed during the recent
economic downturn, which has resulted in higher levels of problem assets and
credit-related costs. Additionally, according to the Federal Housing Finance
Agency, Florida has experienced negative trends in single-family home prices
(as indicated by housing price indices) in most all quarters since the
beginning of 2007 through the end of 2011. High unemployment, high volumes of
non-business bankruptcy filings, decreased median household income, and
depressed real estate values all affect the value of our loan portfolio and the
associated risks. While these statistics improved during 2011, we expect that
the recovery of the economy and housing market in Florida will be slow.
The continuing
depressed economic conditions in Florida have adversely affected financial
institutions statewide. Based on the most recent data available from the FDIC
past-due and nonaccrual loans as a percentage of total loans (median %) for all
Florida financial institutions was 6.39% as of September 30, 2011. This
represents an increase of 0.11% from December 31, 2010. Continuation of adverse
economic conditions will impact our clients as well as the financial
performance of CCB.
35
Strategic Review
Our philosophy
is to build long-term client relationships based on quality service, high
ethical standards, and safe and sound banking practices. We maintain a locally
oriented, community-based focus, which is augmented by experienced, centralized
support in select specialized areas. Our local market orientation is reflected
in our network of banking office locations, experienced community executives
with a dedicated President for each market, and community boards which support
our focus on responding to local banking needs. We strive to offer a broad
array of sophisticated products and to provide quality service by empowering
associates to make decisions in their local markets.
We have sought
to build a franchise in small-to medium-sized, less competitive markets,
located on the outskirts of the larger metropolitan markets where we are
positioned as a market leader. Many of our markets are on the outskirts of
these larger markets in close proximity to major interstate thoroughfares such
as Interstates I-10 and I-75. Our three largest markets are Tallahassee (Leon-Florida),
Gainesville (Alachua-Florida), and Macon (Bibb-Georgia). In 13 of 20 markets in
Florida and 3 of 5 markets in Georgia, we rank within the top 4 in terms of
market share. Furthermore, in the counties in which we operate, we maintain an
average 8.82% market share in the Florida counties and 6.26% in the Georgia
counties, suggesting that there is significant opportunity to grow market share
within these geographic areas. The larger employers in many of our markets are
state and local governments, healthcare providers, education institutions, and
small businesses. While we realize that the markets in our footprint do not
provide for a level of potential growth that the larger metropolitan markets
may provide, our markets do provide good growth dynamics and have historically
grown in excess of the national average. We strive to provide value added
services to our clients by being their banker, not just a bank. This element of
our strategy enables us to distinguish Capital City Bank from our competitors
and was memorialized in our More Than Your Bank, Your Banker advertising
campaign that continued into 2011.
While our
growth has slowed, our long-term vision remains to profitably expand our
franchise through a combination of organic growth in existing markets and
acquisitions. We have long understood that our core deposit funding base is a
predominant driver of our profitability and overall franchise value, and have
focused extensively on this component of our organic growth efforts in recent
years. While we have not been an active acquirer of banks since 2005, this
component of our strategy is still in place. Since 2005, unreasonable pricing
expectations, economic conditions and the regulatory environment have driven an
enhanced focus on organic growth.
As conditions
improve, potential acquisition growth will continue to be focused on Florida,
Georgia, and Alabama with a particular focus on financial institutions located
on the outskirts of larger, metropolitan areas. Five markets have been identified,
four in Florida and one in Georgia, in which management will proactively pursue
expansion opportunities. These markets include Alachua, Marion, Hernando/Pasco
counties in Florida, the western panhandle of Florida, and Bibb and surrounding
counties in central Georgia. Our focus on some of these markets may change as
we continue to evaluate our strategy and the impact the current economic cycle
is having on any individual market. We will also continue to evaluate de novo
expansion opportunities in attractive new markets in the event that acquisition
opportunities are not feasible. Other expansion opportunities that will be
evaluated include asset management and mortgage banking. Embedded in our
acquisition strategy is our desire to partner with institutions that are
culturally similar, have experienced management and possess either established
market presence or have potential for improved profitability through growth,
economies of scale, or expanded services. Generally, these target institutions
will range in asset size from $100 million to $400 million. We believe our
ability to expand, however, has been limited in the short-term due to our
current level of credit risk exposure and the aforementioned
Federal Reserve Resolutions (See Item 1. Business-About Us-Regulatory
Matter).
EXECUTIVE OVERVIEW
2011 was a
year of continued challenge for our industry and in particular banks that
operate in the State of Florida as the economic recovery has been slow and
housing markets remain sluggish. Our earnings improvement in 2011 was driven by
lower credit related costs as well as lower operating expenses. Our primary
focus in 2011 was on the reduction of our nonperforming assets and improvement
in core earnings drivers. Though our nonperforming assets increased year over
year, we made great strides in disposing of OREO properties and stabilizing the
level of problem loan inflow. We continue to allocate significant resources to
these efforts.
An extended
period of low interest rates and weak loan demand continue to place pressure on
our revenues. During 2011, we realized an unfavorable shift in our earning
asset mix as loan run-off in our core loan portfolio outpaced new loan
production. Loan growth remained challenging throughout the year given continued
market uncertainty, consumer and business deleveraging, and government budget
shortfalls. We were, however, in a position to better manage our funding mix
and achieve a respectable net interest margin that remains above the median for
our Southeast bank peers. Growth in noninterest bearing core deposits during
2011 was one of our primary initiatives and year over year we grew these
account balances by approximately $106 million, or 22.8%. This favorable shift
in the mix of our deposit base further strengthens our ability to rely on less
costly forms of funding and deepen our banking relationships through cross-sell
of other bank products, both of which favorably impacted our earnings. Savings
associated with our cost management initiatives also contributed to our
earnings improvement in 2011.
36
Our regulatory
capital ratios improved year over year and remain well above the
regulatory-defined levels required to be considered well capitalized. During
2011, we continued to carry a high level of liquidity as a result of strong
deposit growth. In the fourth quarter of 2011, we suspended the payment of the
dividend on our common stock in order to preserve capital as we continue
working through the protracted economic recovery in Florida.
We see 2012 as
another challenging year as we work to reduce our inventory of nonperforming
assets, however, we remain focused on our core earnings drivers to better
position us for the future.
Key components
of our 2011 financial performance are summarized below:
Results of Operations
|
|
|
|
|
For 2011,
taxable equivalent net interest income decreased $6.1 million, or 6.2%, to
$92.8 million due to an unfavorable change in earning asset mix and yield,
partially offset by a reduction in interest expense. Our net interest margin
of 4.18% in 2011 was 14 basis points lower than 2010 reflecting an
unfavorable shift in the mix of our earning assets due lower loan balances
and continued downward pressure on yields reflective of the extended low rate
environment. We continue to manage our deposit mix and rates to partially
mitigate the unfavorable impact of weak loan demand and repricing.
|
|
|
|
|
|
We recorded
a loan loss provision of $19.0 million for 2011 compared to $23.8 million in
2010 reflecting a lower level of specific reserves required for newly identified
impaired loans. Other real estate owned (OREO) costs continue to be a
significant driver of our performance and totaled $12.7 million in 2011 versus
$14.9 million in 2010, reflecting a decline in the level of valuation
write-downs.
|
|
|
|
|
|
For 2011,
noninterest income totaled $58.8 million, an increase of $2.0 million, or
3.6%, over 2010 due to a $2.2 million increase in other income reflective of
a $3.2 million pre-tax gain from the sale of our Class B shares of Visa stock
that was partially offset by lower merchant fees of $1.1 million. Higher
retail brokerage fees of $0.4 million and bank card fees of $0.9 million also
contributed to the year over year increase, but were partially offset by
lower deposit fees of $1.0 million.
|
|
|
|
|
|
Noninterest
expense totaled $126.2 million in 2011, a $7.7 million, or 5.7%, decline from
2010 driven by lower expense for FDIC insurance fees of $1.9 million, intangible
amortization of $2.0 million, and OREO properties of $2.2 million. Continued
efforts to better manage controllable expenses such as advertising,
professional fees, legal fees, and telephone also contributed to the decline
for the year.
|
Financial Condition
|
|
|
|
|
Average
earning assets for 2011 were approximately $2.221 billion, representing a
decrease of $73.0 million, or 3.2%, from 2010 driven by a decline in average
deposit balances of $110.7 million, or 5.0%. Further reduction in loan
balances attributable to slow recovery of loan demand in our markets, and the
impact of loans migrating to OREO status as well as loan charge-offs drove an
unfavorable shift in the mix of our earning assets.
|
|
|
|
|
|
We continue
to maintain a strong liquidity position as evidenced by average funds sold of
approximately $229.0 million for the year. During 2011, average investment
securities grew by $89.1 million, or 41.2%, reflecting the deployment of
liquidity into higher yielding investment securities.
|
|
|
|
|
|
Average
deposit balances declined by $110.7 million, or 5.0%, for 2011, primarily in
the higher cost certificate of deposit category. Strong growth in average
noninterest bearing account balances of $105.5 million, or 22.8%, during 2011
has enabled us to lower our cost of funds and partially mitigate the impact
of the extended low interest environment on our earning asset yields.
|
|
|
|
|
|
At year-end
2011, our nonperforming assets totaled $137.6 million, an increase of $14.0
million from year-end 2010. The level of our nonperforming assets reduced to
a low of $114.6 million at the end of the third quarter of 2011 as nonaccrual
loan balances reached a low of $53.0 million. However, the addition of five
large relationships during the fourth quarter of 2011 increased our
nonaccrual loan balance to $75.0 million, reflecting the impact of the slow
economic recovery on our borrowers. During 2011, we realized a significant
increase in sales of our OREO properties and for the second straight year
realized a reduction in the gross additions to our nonaccrual portfolio.
|
|
|
|
|
|
Our
allowance for loan losses at year-end 2011 was $31.0 million (1.91% of loans)
and provided coverage of 41% of nonperforming loans compared to $35.4 million
(2.01% of loans) and 54% of nonperforming loans at year-end 2010. Net
charge-offs for 2011 totaled $23.4 million, or 1.39% of total loans compared
to $32.4 million, or 1.77%, in 2010 reflective of lower charge-offs for
construction loans. Over the last four years, we have recorded a cumulative loan
loss provision totaling $115.3 million, or 6.0% of beginning loans and have
recognized cumulative net charge-offs of $102.0 million, or 5.3% of beginning
loans.
|
|
|
|
|
|
Shareowners
equity declined by $7.1 million from $259.0 million at December 31, 2010 to
$251.9 million at December 31, 2011. We continue to maintain a strong capital
base as evidenced by a risk based capital ratio of 15.32% and a tangible
common equity ratio of 6.51% compared to 14.59% and 6.82%, respectively, at
year-end 2010. During 2011, we paid cash dividends totaling $5.1 million, or
$0.30 per share, but in the fourth quarter of 2011 we suspended dividend
payments to preserve our capital given the slower economic recovery in our
markets.
|
37
RESULTS OF OPERATIONS
For 2011, we
realized net income of $4.9 million, or $0.29 per diluted share compared to a
net loss of $0.4 million, or $0.02 per diluted share, in 2010, and a net loss
of $3.5 million, or $0.20 per diluted share in 2009.
The improvement
in earnings for 2011 was due to a lower loan loss provision of $4.8 million, a
$2.0 million increase in noninterest income, and lower noninterest expense of
$7.7 million, partially offset by a reduction in net interest income of $5.6
million and higher income taxes of $3.6 million. 2011 performance reflects the
sale of our Visa Class B shares of stock, which resulted in a $2.6 million net
gain ($3.2 million pre-tax included in noninterest income and a swap liability
of $0.6 million included in noninterest expense).
For 2010, the
improvement in earnings was due to a lower loan loss provision of $16.2
million, partially offset by an $8.4 million reduction in net interest income,
lower noninterest income of $0.6 million, higher noninterest expense of $1.8
million, as well as a lower income tax benefit of $2.3 million.
A condensed
earnings summary for the last three years is presented in Table 1 below:
Table 1
CONDENSED SUMMARY OF EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(Dollars
in Thousands, Except Per Share Data)
|
|
2011
|
|
2010
|
|
2009
|
|
Interest Income
|
|
$
|
99,459
|
|
$
|
110,495
|
|
$
|
122,776
|
|
Taxable Equivalent Adjustments
|
|
|
925
|
|
|
1,447
|
|
|
2,296
|
|
Total Interest Income (FTE)
|
|
|
100,384
|
|
|
111,942
|
|
|
125,072
|
|
Interest Expense
|
|
|
7,537
|
|
|
12,962
|
|
|
16,842
|
|
Net Interest Income (FTE)
|
|
|
92,847
|
|
|
98,980
|
|
|
108,230
|
|
Provision for Loan Losses
|
|
|
18,996
|
|
|
23,824
|
|
|
40,017
|
|
Taxable Equivalent Adjustments
|
|
|
925
|
|
|
1,447
|
|
|
2,296
|
|
Net Interest Income After Provision for
Loan Losses
|
|
|
72,926
|
|
|
73,709
|
|
|
65,917
|
|
Noninterest Income
|
|
|
58,848
|
|
|
56,825
|
|
|
57,391
|
|
Noninterest Expense
|
|
|
126,248
|
|
|
133,916
|
|
|
132,115
|
|
Income (Loss) Before Income Taxes
|
|
|
5,526
|
|
|
(3,382
|
)
|
|
(8,807
|
)
|
Income Tax Expense (Benefit)
|
|
|
629
|
|
|
(2,969
|
)
|
|
(5,336
|
)
|
Net Income (Loss)
|
|
$
|
4,897
|
|
$
|
(413
|
)
|
$
|
(3,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic Net Income (Loss) Per Share
|
|
$
|
0.29
|
|
$
|
(0.02
|
)
|
$
|
(0.20
|
)
|
Diluted Net Income (Loss) Per Share
|
|
$
|
0.29
|
|
$
|
(0.02
|
)
|
$
|
(0.20
|
)
|
Net Interest Income
Net interest
income represents our single largest source of earnings and is equal to
interest income and fees generated by earning assets, less interest expense paid
on interest bearing liabilities. We provide an analysis of our net interest
income, including average yields and rates in Tables 2 and 3. We provide this
information on a taxable equivalent basis to reflect the tax-exempt status of
income earned on certain loans and investments, the majority of which are state
and local government debt obligations.
In 2011, our
taxable equivalent net interest income decreased $6.1 million, or 6.2%. This
follows a decrease of $9.3 million, or 8.5%, in 2010, and a decrease of $3.1
million, or 2.8%, in 2009. The decrease in our taxable equivalent net interest
income in all years resulted from an unfavorable change in earning asset mix
and yield, partially offset by a reduction in interest expense. Additionally,
foregone interest on nonaccrual loans was lower in 2011 compared to 2010
helping to reduce the year-over-year decrease, but was a contributing factor to
the declines experienced in both 2010 and 2009.
For the year
2011, taxable equivalent interest income declined $11.6 million, or 10.3%, from
2010 and $13.2 million, or 10.5%, in 2010 over 2009. For the periods presented,
taxable equivalent interest income was impacted by the factors mentioned above.
These factors
produced a 36 basis point decline in the yield on earning assets, which
decreased from 4.88% in 2010 to 4.52% for 2011. This compares to an 85 basis
point decline in 2010 over 2009.
Interest
expense decreased $5.4 million, or 41.9%, from 2010, and $3.9 million, or
23.0%, in 2010 over 2009. The decline in interest expense in 2011 resulted from
a concentrated effort in all markets to lower the rates on interest bearing
non-maturity balances and certificates of deposit, as well as a net reduction
in the rates for our variable rate subordinated notes. The reduction in 2010
primarily reflected the decline in rates in certificate of deposits and the
lower rates on the subordinated notes.
38
The average
rate paid on interest bearing liabilities decreased 22 and 21 basis points
compared to 2010 and 2009, respectively, reflecting the factors mentioned
above.
Our interest
rate spread (defined as the taxable equivalent yield on average earning assets
less the average rate paid on interest bearing liabilities) decreased 11 basis
points in 2011 compared to 2010 and declined 59 basis points in 2010 compared
to 2009. The decrease in both years was primarily attributable to the adverse
impact of lower rates and a change in the mix of earning assets, which more
than offset the repricing of our deposit base.
Our net interest
margin (defined as taxable equivalent interest income less interest expense
divided by average earning assets) of 4.18% in 2011 was 14 basis points lower
than the 4.32% recorded in 2010 and the 4.96 reported in 2009. In 2011,
compared to 2010, the yield on earning assets declined 36 basis points and was
partially offset by a decline in the cost of funds of 22 basis points.
The continued
asset repricing and an unfavorable shift in our earning asset mix resulted in a
net interest margin of 4.17% for the fourth quarter of 2011, which represents a
decline of 34 basis points over the fourth quarter of 2010. The decline in
earning assets primarily attributable to the loan portfolio, coupled with the
low rate environment continues to put pressure on our net interest income.
Lowering our costs of funds, to the extent we can, and continuing to shift the
mix of our deposits will help to partially mitigate the unfavorable impact of
weak loan demand and repricing.
As experienced
in 2010 and again throughout 2011, historically low interest rates (essentially
setting a floor on deposit repricing), foregone interest, lower loan fees,
unfavorable asset repricing without the flexibility to significantly adjust
deposit rates and core deposit growth (which has strengthened our liquidity
position, but contributed to an unfavorable shift in our earning asset mix),
have all placed pressure on our net interest margin. Our current strategy as
well as historically, is to not accept greater interest rate risk by reaching
further out the curve for yield, particularly given the fact that short term
rates are at historical lows. We continue to maintain short duration portfolios
on both sides of the balance sheet and believe we are well positioned to
respond to changing market conditions. Over time, this strategy has produced
fairly consistent outcomes and a net interest margin that is significantly
above peer comparisons. Given the unfavorable asset repricing and low rate
environment, we anticipate continued pressure on the margin during 2012.
39
Table 2
AVERAGE BALANCES AND INTEREST RATES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Taxable Equivalent Basis - Dollars
in
Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
|
Average
Balance
|
|
Interest
|
|
Average
Rate
|
|
Average
Balance
|
|
Interest
|
|
Average
Rate
|
|
Average
Balance
|
|
Interest
|
|
Average
Rate
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, Net of
Unearned Interest
(1)(2)
|
|
$
|
1,686,995
|
|
$
|
95,520
|
|
|
5.66
|
%
|
$
|
1,829,193
|
|
$
|
106,342
|
|
|
5.81
|
%
|
$
|
1,961,990
|
|
$
|
118,186
|
|
|
6.02
|
%
|
Taxable
Investment Securities
|
|
|
243,059
|
|
|
3,320
|
|
|
1.38
|
|
|
126,078
|
|
|
2,681
|
|
|
2.12
|
|
|
83,648
|
|
|
2,698
|
|
|
3.22
|
|
Tax-Exempt
Investment Securities
(2)
|
|
|
62,497
|
|
|
996
|
|
|
1.59
|
|
|
90,352
|
|
|
2,332
|
|
|
2.58
|
|
|
105,683
|
|
|
4,106
|
|
|
3.88
|
|
Funds Sold
|
|
|
228,766
|
|
|
548
|
|
|
0.24
|
|
|
248,659
|
|
|
587
|
|
|
0.23
|
|
|
32,911
|
|
|
82
|
|
|
0.25
|
|
Total Earning
Assets
|
|
|
2,221,317
|
|
|
100,384
|
|
|
4.52
|
%
|
|
2,294,282
|
|
|
111,942
|
|
|
4.88
|
%
|
|
2,184,232
|
|
|
125,072
|
|
|
5.73
|
%
|
Cash & Due
From Banks
|
|
|
48,823
|
|
|
|
|
|
|
|
|
51,883
|
|
|
|
|
|
|
|
|
76,107
|
|
|
|
|
|
|
|
Allowance for
Loan Losses
|
|
|
(32,066
|
)
|
|
|
|
|
|
|
|
(40,717
|
)
|
|
|
|
|
|
|
|
(42,331
|
)
|
|
|
|
|
|
|
Other Assets
|
|
|
345,123
|
|
|
|
|
|
|
|
|
339,283
|
|
|
|
|
|
|
|
|
298,807
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
2,583,197
|
|
|
|
|
|
|
|
$
|
2,644,731
|
|
|
|
|
|
|
|
$
|
2,516,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW Accounts
|
|
$
|
748,774
|
|
$
|
890
|
|
|
0.12
|
%
|
$
|
863,719
|
|
$
|
1,406
|
|
|
0.16
|
%
|
$
|
711,753
|
|
$
|
1,039
|
|
|
0.15
|
%
|
Money Market
Accounts
|
|
|
282,271
|
|
|
437
|
|
|
0.15
|
|
|
320,786
|
|
|
1,299
|
|
|
0.41
|
|
|
320,531
|
|
|
1,288
|
|
|
0.40
|
|
Savings Accounts
|
|
|
151,801
|
|
|
73
|
|
|
0.05
|
|
|
131,945
|
|
|
65
|
|
|
0.05
|
|
|
121,582
|
|
|
60
|
|
|
0.05
|
|
Other Time
Deposits
|
|
|
330,750
|
|
|
2,547
|
|
|
0.77
|
|
|
413,428
|
|
|
5,875
|
|
|
1.42
|
|
|
420,198
|
|
|
8,198
|
|
|
1.95
|
|
Total Interest
Bearing Deposits
|
|
|
1,513,596
|
|
|
3,947
|
|
|
0.26
|
%
|
|
1,729,878
|
|
|
8,645
|
|
|
0.50
|
%
|
|
1,574,064
|
|
|
10,585
|
|
|
0.67
|
%
|
Short-Term
Borrowings
|
|
|
68,061
|
|
|
305
|
|
|
0.45
|
|
|
27,864
|
|
|
159
|
|
|
0.57
|
|
|
79,321
|
|
|
291
|
|
|
0.36
|
|
Subordinated
Notes Payable
|
|
|
62,887
|
|
|
1,380
|
|
|
2.16
|
|
|
62,887
|
|
|
2,008
|
|
|
3.15
|
|
|
62,887
|
|
|
3,730
|
|
|
5.85
|
|
Other Long-Term
Borrowings
|
|
|
47,841
|
|
|
1,905
|
|
|
3.98
|
|
|
51,767
|
|
|
2,150
|
|
|
4.15
|
|
|
51,973
|
|
|
2,236
|
|
|
4.30
|
|
Total Interest
Bearing Liabilities
|
|
|
1,692,385
|
|
|
7,537
|
|
|
0.45
|
%
|
|
1,872,396
|
|
|
12,962
|
|
|
0.69
|
%
|
|
1,768,245
|
|
|
16,842
|
|
|
0.95
|
%
|
Noninterest
Bearing Deposits
|
|
|
567,987
|
|
|
|
|
|
|
|
|
462,445
|
|
|
|
|
|
|
|
|
418,365
|
|
|
|
|
|
|
|
Other Liabilities
|
|
|
59,777
|
|
|
|
|
|
|
|
|
45,211
|
|
|
|
|
|
|
|
|
54,660
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
2,320,149
|
|
|
|
|
|
|
|
|
2,380,052
|
|
|
|
|
|
|
|
|
2,241,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREOWNERS
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
SHAREOWNERS EQUITY
|
|
|
263,048
|
|
|
|
|
|
|
|
|
264,679
|
|
|
|
|
|
|
|
|
275,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
& EQUITY
|
|
$
|
2,583,197
|
|
|
|
|
|
|
|
$
|
2,644,731
|
|
|
|
|
|
|
|
$
|
2,516,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate
Spread
|
|
|
|
|
|
|
|
|
4.07
|
%
|
|
|
|
|
|
|
|
4.19
|
%
|
|
|
|
|
|
|
|
4.78
|
%
|
Net Interest
Income
|
|
|
|
|
$
|
92,847
|
|
|
|
|
|
|
|
$
|
98,980
|
|
|
|
|
|
|
|
$
|
108,230
|
|
|
|
|
Net Interest
Margin
(3)
|
|
|
|
|
|
|
|
|
4.18
|
%
|
|
|
|
|
|
|
|
4.32
|
%
|
|
|
|
|
|
|
|
4.96
|
%
|
|
|
(1)
|
Average balances include nonaccrual loans. Interest income includes
loan fees of $1.5 million, $1.5 million, and $1.6 million in 2011, 2010, and
2009, respectively.
|
(2)
|
Interest income includes the effects of taxable equivalent
adjustments using a 35% tax rate.
|
(3)
|
Taxable equivalent net interest income divided by average earning
assets.
|
40
Table 3
RATE/VOLUME ANALYSIS
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Changes From 2010
|
|
2010 Changes From 2009
|
|
|
|
Due to Average
|
|
Due to Average
|
|
(Taxable
Equivalent Basis - Dollars in Thousands)
|
|
Total
|
|
Volume
|
|
Rate
|
|
Total
|
|
Volume
|
|
Rate
|
|
Earnings Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, Net of Unearned Interest(2)
|
|
$
|
(10,822
|
)
|
$
|
(8,181
|
)
|
$
|
(2,641
|
)
|
$
|
(11,844
|
)
|
$
|
(7,362
|
)
|
$
|
(4,482
|
)
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
640
|
|
|
1,908
|
|
|
(1,268
|
)
|
|
(17
|
)
|
|
753
|
|
|
(770
|
)
|
Tax-Exempt(2)
|
|
|
(1,337
|
)
|
|
(719
|
)
|
|
(618
|
)
|
|
(1,774
|
)
|
|
(596
|
)
|
|
(1,178
|
)
|
Funds Sold
|
|
|
(39
|
)
|
|
(46
|
)
|
|
7
|
|
|
505
|
|
|
536
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(11,558
|
)
|
|
(7,038
|
)
|
|
(4,520
|
)
|
|
(13,130
|
)
|
|
(6,669
|
)
|
|
(6,461
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW Accounts
|
|
|
(515
|
)
|
|
(187
|
)
|
|
(328
|
)
|
|
366
|
|
|
222
|
|
|
144
|
|
Money Market Accounts
|
|
|
(862
|
)
|
|
(156
|
)
|
|
(706
|
)
|
|
12
|
|
|
1
|
|
|
11
|
|
Savings Accounts
|
|
|
8
|
|
|
10
|
|
|
(2
|
)
|
|
5
|
|
|
5
|
|
|
0
|
|
Time Deposits
|
|
|
(3,329
|
)
|
|
(1,176
|
)
|
|
(2,153
|
)
|
|
(2,323
|
)
|
|
(132
|
)
|
|
(2,191
|
)
|
Short-Term Borrowings
|
|
|
145
|
|
|
135
|
|
|
10
|
|
|
(132
|
)
|
|
(218
|
)
|
|
86
|
|
Subordinated Notes Payable
|
|
|
(628
|
)
|
|
|
|
|
(628
|
)
|
|
(1,722
|
)
|
|
|
|
|
(1,722
|
)
|
Long-Term Borrowings
|
|
|
(244
|
)
|
|
(163
|
)
|
|
(81
|
)
|
|
(86
|
)
|
|
(9
|
)
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(5,425
|
)
|
|
(1,537
|
)
|
|
(3,888
|
)
|
|
(3,880
|
)
|
|
(131
|
)
|
|
(3,749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Net Interest Income
|
|
$
|
(6,133
|
)
|
$
|
(5,501
|
)
|
$
|
(632
|
)
|
$
|
(9,250
|
)
|
$
|
(6,538
|
)
|
$
|
(2,712
|
)
|
|
|
(1)
|
This table
shows the change in taxable equivalent net interest income for comparative
periods based on either changes in average volume or changes in average rates
for earning assets and interest bearing liabilities. Changes which are not
solely due to volume changes or solely due to rate changes have been
attributed to rate changes.
|
|
|
(2)
|
Interest
income includes the effects of taxable equivalent adjustments using a 35% tax
rate to adjust interest on tax-exempt loans and securities to a taxable
equivalent basis.
|
41
Provision for Loan Losses
The provision
for loan losses was $19.0 million in 2011, compared to $23.8 million in 2010
and $40.0 million in 2009. The decline in the loan loss provision for 2011 was
primarily due to lower specific reserves required for newly identified impaired
loans. Early in the credit cycle during 2008 and 2009, we
experienced a higher volume of impaired loan additions related to higher risk
borrowing activities, primarily construction and land development, a large
portion of which has migrated through the collection and resolution cycle. We
discuss this trend in further detail below under Risk Element Assets and
Allowance for Loan Losses.
The reduction
in the loan loss provision for 2010 compared to 2009 reflected lower impaired
loan reserves as the balance of our impaired loans declined and inflow into the
impaired category slowed significantly year over year. The balance of our
impaired loans totaled $87.8 million at year-end 2010 compared to $112.0
million at year-end 2009. A reduction in our general reserve also contributed
to the lower loan loss provision. Improved loan quality trends realized in loan
delinquencies, problem loan inflow, and classified loans contributed to the
reduction in general reserve requirements.
Noninterest Income
Noninterest
income totaled $58.8 million in 2011, $56.8 million in 2010, and $57.4 million
in 2009. For 2011, the $2.0 million increase over 2010 was driven by a $2.2
million increase in other income. The increase in other income reflects a $3.2
million pre-tax gain from the sale of our Class B shares of Visa stock that was
partially offset by lower merchant fees of $1.1 million. Higher retail
brokerage fees of $0.4 million and bank card fees of $0.9 million also
contributed to the year over year increase, but were partially offset by lower
deposit fees of $1.0 million.
For 2010, the
$0.6 million decline was driven by lower deposit fees of $1.6 million and other
income of $0.9 million, partially offset by higher asset management fees of
$0.3 million, mortgage banking fees of $0.2 million, retail brokerage fees of
$0.2 million, and bank card fees totaling $1.3 million.
Noninterest
income as a percent of total operating revenues (net interest income plus
noninterest income) was 39.1% in 2011, 36.8% in 2010, and 35.1% in 2009. The
improvement in this metric for 2011 was driven by the gain from the sale of our
Visa stock. This metric was also impacted by a lower level of net interest
income in both 2011 and 2010.
Legislated
changes to Regulation E, which went into effect in July 2010, adversely
impacted our deposit fees and, while we are exempt from requirements of Section
920 of the Dodd-Frank Act (the Durbin Amendment) and therefore not directly
impacted, we do not yet know to what extent our interchange income will be
indirectly affected as the market adjusts to the implementation of the Durbin
Amendment. In an effort to address the impact of these legislative changes, we
continue to develop strategies aimed at deepening our banking relationships
with our existing client base, improving our fee collection experience, and
growing our wealth management line of business.
The table
below reflects the major components of noninterest income.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Noninterest Income:
|
|
|
|
|
|
|
|
|
|
|
Service Charges on Deposit Accounts
|
|
$
|
25,451
|
|
$
|
26,500
|
|
$
|
28,142
|
|
Data Processing Fees
|
|
|
3,230
|
|
|
3,610
|
|
|
3,628
|
|
Asset Management Fees
|
|
|
4,364
|
|
|
4,235
|
|
|
3,925
|
|
Retail Brokerage Fees
|
|
|
3,251
|
|
|
2,820
|
|
|
2,655
|
|
Securities Transactions
|
|
|
|
|
|
8
|
|
|
10
|
|
Mortgage Banking Fees
|
|
|
2,675
|
|
|
2,948
|
|
|
2,699
|
|
Interchange Fees(1)
|
|
|
5,622
|
|
|
5,077
|
|
|
4,432
|
|
ATM/Debit Card Fees(1)
|
|
|
4,519
|
|
|
4,123
|
|
|
3,515
|
|
Other
|
|
|
9,736
|
|
|
7,504
|
|
|
8,385
|
|
Total Noninterest Income
|
|
$
|
58,848
|
|
$
|
56,825
|
|
$
|
57,391
|
|
(1)
Together called Bank Card Fees
42
Various
significant components of noninterest income are discussed in more detail
below.
Service Charges on Deposit Accounts
.
For 2011, deposit service charge fees totaled $25.5 million, compared to $26.5
million in 2010 and $28.1 million in 2009. The $1.0 million, or 4.0%, decline
from 2010 was attributable to a lower level of overdraft fees, partially offset
by lower overdraft charge-offs and refunded service charges. The $1.6 million,
or 5.8%, decline from 2009 was also attributable to a lower level of overdraft
fees, partially offset by a lower level of overdraft charge-offs. For both 2011
and 2010, the reduction in overdraft fees was due to reduced activity, which
reflects a higher level of consumer awareness that has both impacted consumer
and business spending habits, as well as new overdraft rules under Regulation E
that became effective in mid 2010. We continue to improve our overdraft product
risk management procedures and our fee collection experience to mitigate the
impact the Regulation E overdraft rules have had on this revenue stream.
Data Processing Fees
.
For 2011, data processing fees totaled $3.2 million, compared to $3.6 million
in 2010 and $3.6 million in 2009. The $0.4 million, or 10.5%, decline from 2010
reflects a reduction in the number of banks that we process for as two of our
bank clients were acquired and migrated to a new processor in mid-2011. We
currently maintain processing arrangements with five banks and five government
agencies. One of the government agency clients represents approximately 41% of
our total data processing fees revenue. We have performed item processing for
this agency for approximately 30 years the processing contract is subject to
renewal every three years and was last renewed in 2011. We project that the
loss of the two aforementioned bank clients will have an approximate $0.9
million annual impact on our data processing fees. For 2010, our data
processing fees were essentially flat compared to 2009.
Asset Management Fees
.
For 2011, asset management fees totaled $4.4 million, compared to $4.2 million
in 2010 and $3.9 million in 2009. At year-end 2011, assets under management
totaled $660.6 million, reflecting a decrease of $84.3 million, or 11.3% from
2010. At year-end 2010, assets under management totaled $744.9 million,
reflecting an increase of $38.1 million, or 5.4% from 2009. The higher level of
fees for 2011 was due to revision to our fee schedule for all account types.
The increase in fees for 2010 was due to higher asset valuations for managed
accounts. Fees charged on our asset management accounts are based on a
percentage of asset value.
Retail Brokerage Fees
.
Fees from the sale of retail investment and insurance products totaled $3.2
million in 2011 compared to $2.8 million in 2010 and $2.7 million for 2009. The
increase for both comparable periods generally reflects higher account activity
by existing clients due to more active financial planning, and increased sales
efforts including more active outside prospecting for new client relationships
and expansion of existing banking relationships.
Mortgage Banking Fees
.
Mortgage banking fees totaled $2.7 million in 2011 compared to $3.0 million in
2010 and $2.7 million in 2009. The $0.3 million, or 9.3%, decline in 2011 was
attributable to lower loan production that reflects lower home purchase
activity in our Tallahassee market due to lingering concerns about job and
benefit reductions due to the state budget deficit. For 2010, a higher level of
new loan production, including FHA which provides a greater profit margin,
drove the improvement in fee revenue. Market conditions, housing activity, the
level of interest rates and the percent of our fixed rate production have
significant impacts on our mortgage banking fees.
Bank Card Fees
. Bank
card fees (including interchange fees and ATM/debit card fees) totaled $10.1
million in 2011 compared to $9.2 million in 2010 and $7.9 million in 2009. The
increase for both comparable periods reflects higher card utilization as well
as an increase in the number of active cards due to an increase in transaction
accounts. Additionally, an ATM fee increase contributed to the higher revenues
in 2011, while a debit card promotion and improved utilization of our business
debit card contributed to the increase for 2010.
Legislation
enacted under the Durbin Amendment to the Dodd-Frank Act regulates the amount
of interchange fee that can be charged for debit card transactions, placing a
cap on the payment system fee that can be charged to merchants by banks with
$10 billion or more in assets. In the final rules passed by the Federal Reserve,
banks with less than $10 billion were exempted (Small Bank Exemption) from
the new debit card interchange rules. We will continue to monitor the potential
indirect impact to us from the new debit card interchange rules, but since its
implementation there has been no material unfavorable impact on our bank card
fee revenue stream.
Other
. Other
noninterest income totaled $9.7 million in 2011 compared to $7.5 million and
$8.4 million, respectively, for 2010 and 2009. The $2.2 million, or 29.7%,
increase for 2011 reflects a $3.2 million pre-tax gain from the sale of the
Class B shares of our Visa stock, partially offset by a $1.1 million reduction
in merchant fees. For 2010, the $0.9 million, or 10.5%, decrease was driven by
lower merchant fees due to the sale of our merchant services portfolio in
August 2008. After the sale of the portfolio, we continued to service one of
our larger remaining clients until mid-2010 at which time this client migrated
to another processor. The reduction in this revenue source is substantially
offset by a reduction in processing costs which is reflected in noninterest
expense (miscellaneous expense) the impact on net income due to the sale of
our merchant portfolio was not material.
43
Noninterest Expense
Noninterest expense
totaled $126.2 million in 2011 compared to $133.9 million in 2010 and $132.1
million in 2009. For 2011, the $7.7 million, or 5.7%, decline from 2010
reflects lower other expense of $7.8 million and occupancy expense of $0.8
million, partially offset by higher compensation expense of $0.9 million. The
decline in other expense was driven by lower expense for FDIC insurance fees of
$1.9 million, intangible amortization of $2.0 million, and OREO properties of
$2.2 million.
For 2010, the
$1.8 million increase reflects higher expense for OREO properties of $7.3
million and FDIC insurance fees of $1.2 million that were partially offset by
lower expense for compensation of $2.3 million, printing and supplies of $0.4
million, advertising of $0.4 million, intangible amortization of $1.4 million,
professional fees of $0.2 million, and miscellaneous expense of $2.1 million.
The reduction in miscellaneous expense for 2010 was due to lower interchange
fees of $1.0 million, as well as the reversal of our remaining Visa litigation
reserve of approximately $0.8 million, which had the effect of reducing
noninterest expense.
Our operating
efficiency ratio (expressed as noninterest expense, net of intangible
amortization, as a percent of taxable equivalent net interest income plus
noninterest income) was 82.79%, 84.23% and 77.33% in 2011, 2010 and 2009,
respectively. Reduction in taxable equivalent net interest income, higher OREO
expense, and an increase in FDIC insurance fees are the primary reasons for the
elevated efficiency ratio for all of the aforementioned periods. The
improvement in this metric for 2011 was primarily due to the favorable impact
of the $3.2 million pre-tax gain from the sale of our Class B shares of Visa
stock.
In 2012, we
expect to continue to realize an elevated level of costs related to the
management and resolution of nonperforming assets. These costs are primarily
related to legal fees to support the collection of loans and OREO properties,
OREO carrying costs and valuation write-downs. We continue to review and
evaluate opportunities to optimize our operations and reduce operating costs as
well better manage our discretionary expenses.
The table
below reflects the major components of noninterest expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Noninterest Expense:
|
|
|
|
|
|
|
|
|
|
|
Salaries
|
|
$
|
50,417
|
|
$
|
50,102
|
|
$
|
50,494
|
|
Associate Benefits
|
|
|
13,225
|
|
|
12,653
|
|
|
14,573
|
|
Total Compensation
|
|
|
63,642
|
|
|
62,755
|
|
|
65,067
|
|
|
|
|
|
|
|
|
|
|
|
|
Premises
|
|
|
9,622
|
|
|
10,010
|
|
|
9,798
|
|
Equipment
|
|
|
8,558
|
|
|
8,929
|
|
|
9,096
|
|
Total Occupancy
|
|
|
18,180
|
|
|
18,939
|
|
|
18,894
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal Fees
|
|
|
4,106
|
|
|
4,301
|
|
|
3,975
|
|
Professional Fees
|
|
|
3,832
|
|
|
4,338
|
|
|
4,501
|
|
Processing Services
|
|
|
3,708
|
|
|
3,651
|
|
|
3,591
|
|
Advertising
|
|
|
2,471
|
|
|
2,905
|
|
|
3,285
|
|
Travel and Entertainment
|
|
|
898
|
|
|
958
|
|
|
1,123
|
|
Printing and Supplies
|
|
|
1,321
|
|
|
1,455
|
|
|
1,882
|
|
Telephone
|
|
|
1,895
|
|
|
2,059
|
|
|
2,227
|
|
Postage
|
|
|
1,780
|
|
|
1,650
|
|
|
1,711
|
|
FDIC Insurance Fees
|
|
|
4,474
|
|
|
6,324
|
|
|
5,167
|
|
Intangible Amortization
|
|
|
675
|
|
|
2,682
|
|
|
4,042
|
|
Other Real Estate Owned
|
|
|
12,677
|
|
|
14,922
|
|
|
7,577
|
|
Miscellaneous
|
|
|
6,587
|
|
|
6,977
|
|
|
9,073
|
|
Total Other
|
|
|
44,426
|
|
|
52,222
|
|
|
48,154
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Noninterest Expense
|
|
$
|
126,248
|
|
$
|
133,916
|
|
$
|
132,115
|
|
44
Various
significant components of noninterest expense are discussed in more detail
below.
Compensation
.
Compensation expense totaled $63.6 million in 2011, $62.8 million in 2010, and
$65.1 million in 2009. The $0.9 million, or 1.4%, increase in 2011 was due to
higher associate salary expense of $0.3 million and higher associate benefit
expense of $0.6 million. The increase in associate salaries reflects higher
performance pay of $1.1 million and lower realized loan cost of $0.3 million,
partially offset by lower base salary expense of $1.1 million. The increase in
performance pay reflects an increased pay-out level for both associate and
company incentive plans compared to the prior year. Realized loan cost, which
reflects the deferral and amortization of loan costs, is accounted for as a
credit offset to salary expense. A lower number of loans originated during 2011
compared to the prior year reduced the amount of this credit offset. The
decrease in base salary expense reflects a reduction in associate headcount
attributable to attrition. The increase in associate benefit expense for 2011
was due to higher expense for our defined benefit pension plan primarily driven
by the lower discount rate used for computing plan cost.
For 2010, the
$2.3 million reduction in 2010 was driven by lower associate benefit expense of
$1.9 million attributable to lower expense for our defined benefit pension plan
reflecting improved plan asset returns. Lower associate salary expense of $0.4
million also contributed to the decrease and primarily reflects lower base
salary expense due to a reduction in associate headcount.
Occupancy
. Occupancy
expense (including premises and equipment) totaled $18.1 million for 2011,
$18.9 million for 2010, and $18.9 million for 2009. For 2011, lower expense for
furniture, fixtures, and equipment (FF&E) depreciation of $0.4 million,
retail office leases of $0.5 million, and utilities of $0.1 million was
partially offset by higher expense for premises depreciation of $0.1 million
and software licenses of $0.1 million. The reduction in FF&E depreciation
expense primarily reflects full depreciation of larger technology components of
both our mainframe and network systems. Utility expense declined due to energy
management initiatives implemented during 2011 as well as lower utility rates
in our Tallahassee market. The unfavorable variance in software license expense
was primarily due to the upgrade of our financial reporting system during 2011.
Occupancy expense for 2010 compared to 2009 was favorably impacted by lower
expense for retail office leases of $0.2 million, FF&E depreciation of $0.1
million, and software licenses of $0.1 million, partially offset by higher
premises depreciation of approximately $0.4 million. During 2010, we put into
service two newly constructed retail offices in our Macon and Palatka markets
that were previously leased and a newly constructed building for our wealth
management line of business in our Tallahassee market. This activity drove the
aforementioned variances in premises depreciation and retail office lease
expense for 2011 and 2010.
Other
. Other
noninterest expense totaled $44.4 million in 2011, $52.2 million in 2010, and
$48.2 million in 2009. The $7.8 million, or 14.9%, decline from 2010 was
primarily due to lower expense for OREO properties of $2.2 million, intangible
amortization of $2.0 million, and FDIC insurance fees of $1.9 million. Lower
expense for professional fees of $0.5 million, advertising of $0.4 million,
legal fees of $0.2 million, telephone of $0.2 million, and miscellaneous
expense of $0.4 million also contributed to the favorable variance. The lower
level of expense for OREO properties reflects a decline in the level of valuation
adjustments. Intangible amortization expense declined due to the full
amortization of core deposit intangibles related to several past acquisitions.
The reduction in FDIC insurance fees reflects a lower rate due to recent
changes to the FDIC premium structure; we expect 2012 fees to approximate the
level realized in 2011. Professional fees declined due to higher consulting
fees paid in 2010 related to the review of our vendor contracts. The reduction
in advertising expense primarily reflects efficiencies gained in the promotion
of our free checking products. Lower fees paid for problem loan resolution
support drove the favorable variance in legal fees. Telephone expense declined
primarily due to the renegotiation of certain telecom contracts during 2010.
The reduction in miscellaneous expense in 2011 was attributable to a decline in
interchange fees due to the sale of our merchant processing business as noted
above in our discussion of noninterest income.
For 2010, the
$4.1 million, or 8.4%, increase over 2009 was due to higher expense for OREO
properties of $7.3 million and FDIC insurance fees of $1.2 million that were
partially offset by lower expense for intangible amortization of $1.4 million,
professional fees of $0.2 million, advertising of $0.4 million, printing and
supplies of $0.4 million, and miscellaneous expense of $2.1 million. The higher
level of OREO expense was due to growth in OREO properties under management
during 2010 and the associated carrying costs, as well as an increase in valuation
write-downs. The unfavorable variance in 2010 for FDIC insurance fees was due
to a higher premium rate as well as higher deposit balances. The decline in
intangible amortization expense in 2010 reflects the full amortization of core
deposit intangibles recorded during 2004 and 2005. The reductions realized in
professional fees, advertising, and printing/supplies in 2010 generally reflect
management initiatives to better manage controllable expenses. The reduction in
miscellaneous expense for 2010 was due to lower interchange fees that reflect
lower processing costs for our merchant processing business. After the sale of
the business line, we continued to service one of our larger clients until
mid-2010 at which time this client migrated to another processor. The reduction
in this expense was more than offset by a decline in merchant fee revenue which
is reflected in noninterest income. As previously mentioned, the impact on
operating profit for all periods due to the sale of our merchant portfolio was
not material. The reversal of our Visa litigation reserves in 2010 totaling
$0.8 million also had a favorable impact on other noninterest expense.
45
Income Taxes
For 2011, we
realized income tax expense of $0.6 million (effective tax rate of 11.4%)
compared to an income tax benefit of $3.0 million (effective tax rate of 87.8%)
for 2010 and an income tax benefit of $5.3 million (effective tax rate of
60.6%) for 2009. A higher level of book operating profit drove the higher level
of tax expense compared to all prior year periods. The tax provisions for 2011
and 2010 were also affected by the recognition of tax contingencies totaling
approximately $1.0 million and $0.4 million, respectively.
At December
31, 2011, we had net deferred tax assets of $28.4 million (see Note 10 Income
Taxes in our Consolidated Financial Statements), Of this amount, approximately
$25.1 million represents temporary differences between the financial statement
carrying amounts and the corresponding tax bases of assets and liabilities,
which will reverse over time and do not have defined expiration periods.
Approximately $2.7 million of the remaining net deferred tax asset balance
relates to the Banks separate state net operating loss carry-forwards that
have defined expiration dates which are typically 20 years from the date of
creation. Accounting Standards Codification Topic 740, Income Taxes, requires
us to assess whether a valuation should be established against the deferred tax
assets based on the consideration of all available evidence using a more
likely than not standard. We consider both positive and negative evidence and
analyze changes in near-term market conditions as well as other factors which
may impact future operating results. At year-end 2011, after consideration of
all available evidence, we believe that it is more likely than not we will be
able to realize deferred tax benefits through our ability to carry state net
operating losses forward to profitable years. Despite being in a three-year
cumulative loss position for book purposes at year-end 2011, we believe that
our historical earnings performance, capital position and financial projections
support this assessment, and we expect these state net operating losses to be
fully utilized in advance of their expiration.
FINANCIAL CONDITION
Average assets
totaled approximately $2.583 billion for the year 2011, a decrease of $61.5
million, or 2.3%, over 2010. Average earning assets were approximately $2.221
billion, representing a decrease of $73.0 million, or 3.2%, over 2010. Year
over year, average investment securities increased $89.1 million, while average
short-term investments and average loans declined $19.9 million and $142.2
million, respectively. We discuss these variances in more detail below.
Table 2
provides information on average balances and rates, Table 3 provides an
analysis of rate and volume variances and Table 4 highlights the changing mix
of our earning assets over the last three years.
Loans
In 2011,
average loans decreased $142.2 million, or 7.8%, compared to $132.8 million, or
6.8%, in 2010. Loans as a percent of average earning assets declined to 75.9%
in 2011, down from the 2010 and 2009 levels of 79.7% and 89.8%, respectively.
The loan portfolio experienced continued runoff throughout 2011 driven by
declines in all portfolios with the exception of loans to tax-exempt
organizations. The largest declines over the past two years were experienced in
the commercial, construction, commercial real estate, and residential real
estate portfolios. Weak loan demand attributable to the lack of consumer
confidence and a sluggish economy continued to significantly impact all
portfolios in most markets. In addition to lower production and normal
amortization and payoffs, the reduction in the portfolio is also attributable
to gross charge-offs and the transfer of loans to the other real estate owned
category. During 2011, loan resolutions (gross charge-offs plus loans
transferred to OREO) accounted for $63.6 million, or 49%, of the net reduction
in total loans of $130.0 million (based on as of) balances. Since the end of
2007, loan resolutions have accounted for $256.2 million, or approximately 89%
of the net reduction in the portfolio of $287.2 million.
Our bankers
continue to try to reach clients who are interested in moving or expanding
their banking relationships. While we strive to identify opportunities to
increase loans outstanding and enhance the portfolios overall contribution to
earnings, we will only do so by adhering to sound lending principles applied in
a prudent and consistent manner. Thus, we will not relax our underwriting
standards in order to achieve designated growth goals and, where appropriate,
have adjusted our standards to reflect risks inherent in the current economic
environment.
We originate
mortgage loans secured by 1-4 family residential properties through our
Residential Real Estate line of business, a majority of which are fixed rate
loans that are sold into the secondary market to third party purchasers on a
best efforts delivery basis with servicing released. A majority of our
adjustable rate loan product is retained in our loan portfolio. While the loans
sold into the secondary market are without recourse, the purchase agreements
require us to make certain representations and warranties regarding the
existence and sufficiency of file documentation and the absence of fraud by
borrowers or other third parties. If it is determined that a loan was sold in
breach of these representations or warranties, we have the obligation to either
repurchase the loan for the unpaid balance and related investor fees or make
the purchaser whole for the economic benefits of the loan. From January 1, 2007
through December 31, 2011, we originated 4,388 residential real estate loans
totaling approximately $685 million that were sold into the secondary market to
investors. Of this amount, we have been required to repurchase one loan for the
principal amount of approximately $0.2 million. Additionally, since January 1,
2007, we have been required to indemnify one investor in the amount of
approximately $0.1 million.
46
Table 4
SOURCES
OF EARNING ASSET GROWTH
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 to
2011
Change
|
|
Percentage
Total
Change
|
|
Components of
Average Earning Assets
|
|
(Average Balances Dollars In Thousands)
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, Financial, and Agricultural
|
|
$
|
(17,476
|
)
|
|
(24.0
|
)%
|
|
6.6
|
%
|
|
7.2
|
%
|
|
9.1
|
%
|
Real Estate Construction
|
|
|
(32,850
|
)
|
|
(45.0
|
)
|
|
1.4
|
|
|
2.8
|
|
|
6.4
|
|
Real Estate Commercial
|
|
|
(37,368
|
)
|
|
(51.0
|
)
|
|
29.6
|
|
|
30.3
|
|
|
31.5
|
|
Real Estate Residential
|
|
|
(30,640
|
)
|
|
(42.0
|
)
|
|
18.3
|
|
|
19.1
|
|
|
31.6
|
|
Real Estate Home Equity
|
|
|
(503
|
)
|
|
(1.0
|
)
|
|
11.1
|
|
|
10.8
|
|
|
31.5
|
|
Consumer
|
|
|
(23,361
|
)
|
|
(32.0
|
)
|
|
8.8
|
|
|
9.5
|
|
|
11.2
|
|
Total Loans
|
|
$
|
(142,198
|
)
|
|
(195.0
|
)%
|
|
75.8
|
%
|
|
79.7
|
%
|
|
89.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
$
|
116,981
|
|
|
160.0
|
%
|
|
11.0
|
%
|
|
5.5
|
%
|
|
3.8
|
%
|
Tax-Exempt
|
|
|
(27,855
|
)
|
|
(38.0
|
)
|
|
2.9
|
|
|
4.0
|
|
|
4.9
|
|
Total Securities
|
|
|
89,126
|
|
|
122.0
|
|
|
13.9
|
|
|
9.5
|
|
|
8.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds Sold
|
|
|
(19,893
|
)
|
|
(27.0
|
)
|
|
10.3
|
|
|
10.8
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Earning Assets
|
|
$
|
(72,965
|
)
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Our average
loan-to-deposit ratio decreased to 75.0% in 2011 from 83.6% in 2010. The lower
loan-to-deposit ratio reflects both the decline in average loan balances, and
growth in average deposits.
The
composition of our loan portfolio at December 31
st
for each of the
past five years is shown in Table 5. Table 6 arrays our total loan portfolio as
of December 31, 2011, based upon maturities. As a percent of the total
portfolio, loans with fixed interest rates represent 34.0% as of December 31,
2011, versus 34.0% at December 31, 2010.
Table 5
LOANS
BY CATEGORY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
Commercial, Financial and Agricultural
|
|
$
|
130,879
|
|
$
|
157,394
|
|
$
|
189,061
|
|
$
|
206,230
|
|
$
|
208,864
|
|
Real Estate - Construction
|
|
|
26,367
|
|
|
43,239
|
|
|
111,249
|
|
|
141,973
|
|
|
142,248
|
|
Real Estate Commercial Mortgage
|
|
|
639,140
|
|
|
671,702
|
|
|
716,791
|
|
|
656,959
|
|
|
634,920
|
|
Real Estate - Residential
|
|
|
399,372
|
|
|
430,541
|
|
|
416,469
|
|
|
484,238
|
|
|
488,372
|
|
Real Estate Home Equity
|
|
|
244,263
|
|
|
251,565
|
|
|
246,722
|
|
|
218,500
|
|
|
192,428
|
|
Consumer
|
|
|
188,662
|
|
|
204,230
|
|
|
235,648
|
|
|
249,897
|
|
|
249,018
|
|
Total Loans, Net of Unearned Interest
|
|
$
|
1,628,683
|
|
$
|
1,758,671
|
|
$
|
1,915,940
|
|
$
|
1,957,797
|
|
$
|
1,915,850
|
|
Table
6
LOAN
MATURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity Periods
|
|
(Dollars in Thousands)
|
|
One Year
or Less
|
|
Over One
Through
Five Years
|
|
Over
Five
Years
|
|
Total
|
|
Commercial,
Financial and Agricultural
|
|
$
|
60,771
|
|
$
|
45,440
|
|
$
|
11,784
|
|
$
|
117,995
|
|
Real Estate
Construction
|
|
|
23,373
|
|
|
2,676
|
|
|
318
|
|
|
26,367
|
|
Real Estate
Commercial Mortgage
|
|
|
132,481
|
|
|
125,819
|
|
|
393,724
|
|
|
652,024
|
|
Real Estate
Residential
|
|
|
79,616
|
|
|
44,665
|
|
|
275,090
|
|
|
399,371
|
|
Real Estate
Home Equity
|
|
|
669
|
|
|
10,826
|
|
|
232,768
|
|
|
244,263
|
|
Consumer(1)
|
|
|
17,751
|
|
|
121,025
|
|
|
49,887
|
|
|
188,663
|
|
Total
|
|
$
|
314,661
|
|
$
|
350,451
|
|
$
|
963,571
|
|
$
|
1,628,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans with
Fixed Rates
|
|
$
|
131,665
|
|
$
|
269,623
|
|
$
|
168,384
|
|
$
|
569,672
|
|
Loans with
Floating or Adjustable Rates
|
|
|
182,996
|
|
|
80,828
|
|
|
795,187
|
|
|
1,059,011
|
|
Total
|
|
$
|
314,661
|
|
$
|
350,451
|
|
$
|
963,571
|
|
$
|
1,628,683
|
|
(1)
Demand
loans and overdrafts are reported in the category of one year or less.
47
Risk Element Assets
Risk element
assets consist of nonaccrual loans, TDRs, past due loans, OREO, potential
problem loans, and loan concentrations. Table 7 depicts certain categories of
our risk element assets as of December 31
st
for each of the last
five years.
At year-end
2011, our nonperforming assets (including nonaccrual loans and OREO) totaled
$137.6 million, an increase of $14.0 million from year-end 2010, driven by an
increase in both nonaccrual loans and OREO. Nonaccrual loans totaled $75.0
million at year-end 2011, an increase of $9.3 million from year-end 2010. OREO
balances totaled $62.6 million at year-end 2011 compared to $57.9 million at
year-end 2010. Total nonperforming assets represented 5.21% of total assets at
year-end 2011 compared to 4.72% at year-end 2010.
We have
implemented a number of measures and allocated significant resources to reduce
our level of nonperforming assets and mitigate losses. The absolute level of
nonperforming assets remained elevated at year-end 2011 due to the inflow of
nonaccruals in the fourth quarter of 2011. During 2011, we reached a low level
of $115 million in nonperforming assets at the end of the third quarter of 2011
and realized good momentum throughout 2011 in disposing of OREO properties.
Overall, our exposure to higher loss content loans secured by vacant land
continued to decline to 32% of the nonperforming asset portfolio at December
31, 2011 compared to 39% at December 31, 2010, of which 81% and 88%,
respectively, was comprised of residential properties.
Our loan
portfolio will continue to be impacted by the slower pace of the economic
recovery in our region and markets, a sluggish real estate market due to high
inventory levels, and lack of consumer and investor confidence. We expect these
factors to continue to impact the pace of our nonperforming asset resolution
and/or disposal, therefore, making it difficult to predict period to period
changes in the level of our nonperforming assets.
Table 7
RISK
ELEMENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccruing
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, Financial and Agricultural
|
|
|
755
|
|
|
1,059
|
|
|
2,729
|
|
|
1,579
|
|
|
568
|
|
Real Estate - Construction
|
|
|
334
|
|
|
1,907
|
|
|
20,797
|
|
|
21,611
|
|
|
9,179
|
|
Real Estate - Commercial Mortgage
|
|
|
42,820
|
|
|
26,874
|
|
|
29,042
|
|
|
29,749
|
|
|
9,105
|
|
Real Estate - Residential
|
|
|
25,671
|
|
|
30,189
|
|
|
26,599
|
|
|
38,182
|
|
|
5,578
|
|
Real Estate - Home Equity
|
|
|
4,283
|
|
|
4,803
|
|
|
5,280
|
|
|
3,846
|
|
|
509
|
|
Consumer
|
|
|
1,160
|
|
|
868
|
|
|
1,827
|
|
|
1,909
|
|
|
|
|
Total Nonperforming Loans
(NPLs)(1)
|
|
$
|
75,023
|
|
$
|
65,700
|
|
$
|
86,274
|
|
$
|
96,876
|
|
$
|
25,119
|
|
Other Real
Estate Owned
|
|
|
62,600
|
|
|
57,937
|
|
|
36,134
|
|
|
9,222
|
|
|
3,043
|
|
Total
Nonperforming Assets (NPAs)
|
|
$
|
137,623
|
|
$
|
123,637
|
|
$
|
122,408
|
|
$
|
106,098
|
|
$
|
28,162
|
|
Past Due
Loans 30 89 Days
|
|
|
19,425
|
|
|
24,193
|
|
|
36,501
|
|
|
37,343
|
|
|
28,157
|
|
Past Due
Loans 90 Days or More (accruing)
|
|
|
224
|
|
|
159
|
|
|
|
|
|
88
|
|
|
416
|
|
Performing
Troubled Debt Restructurings
|
|
|
37,675
|
|
|
21,649
|
|
|
21,644
|
|
|
1,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming
Loans/Loans
|
|
|
4.61
|
%
|
|
3.74
|
%
|
|
4.50
|
%
|
|
4.95
|
%
|
|
1.31
|
%
|
Nonperforming
Assets/Total Assets
|
|
|
5.21
|
|
|
4.72
|
|
|
4.52
|
|
|
4.26
|
|
|
1.08
|
|
Nonperforming
Assets/Loans Plus OREO
|
|
|
8.14
|
|
|
6.81
|
|
|
6.27
|
|
|
5.39
|
|
|
1.47
|
|
Nonperforming
Assets/Capital(2)
|
|
|
48.63
|
|
|
41.99
|
|
|
39.25
|
|
|
33.59
|
|
|
9.06
|
|
Allowance/Nonperforming
Loans
|
|
|
41.37
|
%
|
|
53.94
|
%
|
|
51.00
|
%
|
|
38.20
|
%
|
|
71.92
|
%
|
|
|
(1)
|
Nonaccrual TDRs totaling $13 million are included in nonaccrual/NPL
totals for December 31, 2011
.
|
(2)
|
For computation of this percentage, Capital refers to shareowners
equity plus the allowance for loan losses
.
|
48
Nonaccrual Loans
.
Nonaccrual loans totaled $75.0 million at year-end 2011, an increase of $9.3
million from year-end 2010. Our nonaccrual loan balance reached a low of $53.4
million in the third quarter of 2011, but gross additions increased in the
fourth quarter of 2011 as we were not successful in restructuring workout
agreements with two large loan relationships. Three other large relationships
were added to nonaccrual status during the fourth quarter of 2011 due to
increased uncertainty about the borrowers continued ability to repay under the
existing repayment terms. Each of the three relationships continues to make
payments, though not in a timely manner. The five aforementioned relationships
constituted approximately $16.9 million of the $21.6 million increase in
nonaccrual loans from the third quarter of 2011. The addition of these loans
did not result in a material increase in impaired reserves because we believe
the underlying collateral is sufficient to mitigate any additional losses.
During 2011, we realized a slightly lower level of loan defaults and additions
to the nonaccrual category. A majority of the year over year increase in
nonaccrual loans was realized in the commercial real estate category, a major
portion of which was related to loans in the investor real estate, improved
property category.
Generally,
loans are placed on non-accrual status if principal or interest payments become
90 days past due and/or management deems the collectability of the principal
and/or interest to be doubtful. Once a loan is placed in nonaccrual status, all
previously accrued and uncollected interest is reversed against interest
income. Interest income on nonaccrual loans is recognized when the ultimate
collectability is no longer considered doubtful. Loans are returned to accrual
status when the principal and interest amounts contractually due are brought
current or when future payments are reasonably assured. If interest on our
loans classified as nonaccrual during 2011 had been recognized on a fully
accruing basis, we would have recorded an additional $5.7 million of interest
income for the year ended December 31, 2011.
The
composition of our nonaccrual loan portfolio as of December 31 is provided in
the table below.
|
|
|
|
|
|
|
|
(Dollars
in Thousands)
|
|
2011
|
|
2010
|
|
Commercial, Financial and Agricultural
|
|
$
|
755
|
|
$
|
1,059
|
|
Real Estate - Construction
|
|
|
334
|
|
|
1,907
|
|
Real Estate - Commercial Mortgage
|
|
|
42,820
|
|
|
26,874
|
|
Real Estate - Residential
|
|
|
25,671
|
|
|
30,189
|
|
Real Estate - Home Equity
|
|
|
4,283
|
|
|
4,803
|
|
Consumer
|
|
|
1,160
|
|
|
868
|
|
Total Nonaccrual Loans
|
|
$
|
75,023
|
|
$
|
65,700
|
|
Vacant land
loans of $7.9 million (approximately 99 borrowing relationships) represented
approximately 10% of our nonaccrual loan balance at year-end 2011, which is a
decline from $18.7 million, or 28%, at the end of 2010, $38.0 million, or 44%,
at the end of 2009, and $51.3 million, or 53%, at year-end 2008. This declining
trend reflects the migration of these loans through the resolution process as
well as the slowdown in loan defaults for the remaining portion of this
portfolio class. Of the $7.9 million in these loans at year-end 2011, most
(90%) were in the residential real estate loan category.
Troubled Debt Restructurings.
TDRs
are loans on which, due to the deterioration in the borrowers financial
condition, the original terms have been modified in favor of the borrower. From
time to time our lenders will modify a loan as a workout alternative. Most of
these instances involve a principal moratorium or extension of the loan term.
Loans
classified as TDRs at year-end 2011 totaled $50.7 million compared to $28.1
million at year-end 2010. Accruing TDRs make up
approximately $37.7 million, or 78%, of our TDR portfolio at year-end 2011 of
which $1.0 million was over 30 days past due. The weighted average rate for
the loans within the accruing TDR portfolio is 5.4%. During 2011, we modified 148 loan
contracts totaling approximately $36.4 million of which 22 loan contracts
totaling $9.2 million have defaulted. The clarified TDR accounting guidance
issued in 2011 may result in renewals of some classified loans being considered
TDRs, even if no reduction in rate is offered as the renewal rate
may be below market rates for similar credit risk profiles; as we continue
to work with our borrowers and take a course of action most advantageous to
the Bank in the long-term, we expect TDRs to remain elevated.
Modified loans
are subject to an underwriting evaluation as well as our policies governing
accrual/nonaccrual evaluation consistent with all other loans of the same
product type.
The
composition of our TDR portfolio as of December 31 is provided in the table
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
(Dollars in Thousands)
|
|
Accruing
|
|
Nonaccruing(1
)
|
|
Accruing
|
|
Nonaccruing(1)
|
|
Commercial, Financial and Agricultural
|
|
$
|
694
|
|
$
|
|
|
$
|
768
|
|
$
|
101
|
|
Real Estate - Construction
|
|
|
178
|
|
|
|
|
|
660
|
|
|
|
|
Real Estate - Commercial
|
|
|
20,062
|
|
|
12,029
|
|
|
10,635
|
|
|
5,742
|
|
Real Estate - Residential
|
|
|
15,553
|
|
|
947
|
|
|
8,884
|
|
|
615
|
|
Real Estate - Home Equity
|
|
|
1,161
|
|
|
|
|
|
648
|
|
|
|
|
Consumer
|
|
|
27
|
|
|
|
|
|
54
|
|
|
|
|
Total TDRs
|
|
$
|
37,675
|
|
$
|
12,976
|
|
$
|
21,649
|
|
$
|
6,458
|
|
|
|
(1)
|
Nonaccruing TDRs are included in nonaccrual/NPL totals and NPA/NPL
ratio calculations.
|
49
Other Real Estate Owned
.
OREO represents property acquired as the result of borrower defaults on loans
or by receiving a deed in lieu of foreclosure. OREO is recorded at the lower of
cost or estimated fair value, less estimated selling costs, at the time of
foreclosure. Write-downs occurring at foreclosure are charged against the
allowance for possible loan losses. On an ongoing basis, properties are either
revalued internally or by a third party appraiser as required by applicable
regulations. Subsequent declines in value are reflected as other noninterest
expense. Carrying costs related to maintaining the OREO properties are expensed
as incurred and are also reflected as other noninterest expense.
OREO totaled
$62.6 million at December 31, 2011 versus $57.9 million at December 31, 2010. During
2011, we added properties totaling $37.9 million and partially or completely
liquidated properties totaling $27.8 million. Revaluation adjustments for other
real estate owned properties during 2011 totaled $5.0 million and were charged
to noninterest expense when realized. For 2010, we added properties totaling
$49.2 million and partially or completely liquidated properties totaling $18.1
million. Revaluation adjustments for other real estate owned properties during
2010 totaled $9.3 million and were charged to noninterest expense when
realized.
The
composition of our OREO portfolio as of December 31 is provided in the table
below.
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
Lots/Land
|
|
$
|
38,866
|
|
$
|
33,923
|
|
Residential
1-4
|
|
|
10,403
|
|
|
14,092
|
|
Commercial
Building
|
|
|
11,143
|
|
|
8,209
|
|
Other
|
|
|
2,188
|
|
|
1,713
|
|
Total OREO
|
|
$
|
62,600
|
|
$
|
57,937
|
|
Potential Problem Loans
.
Potential problem loans are defined as those loans which are now current but
where management has doubt as to the borrowers ability to comply with present
loan repayment terms. At December 31, 2011, we had $18.0 million in loans of
this type which are not included in either of the nonaccrual, TDR or 90 day
past due loan categories compared to $23.0 million at year-end 2010. Management
monitors these loans closely and reviews their performance on a regular basis.
Loan Concentrations
.
Loan concentrations are considered to exist when there are amounts loaned to
multiple borrowers engaged in similar activities which cause them to be
similarly impacted by economic or other conditions and such amount exceeds 10%
of total loans. Due to the lack of diversified industry within the markets
served by the Bank and the relatively close proximity of the markets, we have
both geographic concentrations as well as concentrations in the types of loans
funded. Specifically, due to the nature of our markets, a significant portion
of the loan portfolio has historically been secured with real estate,
approximately 80% at year-end 2011 and 79% at year-end 2010. The primary types
of real estate collateral are commercial properties and 1-4 family residential
properties. At December 31, 2011, commercial real estate and residential real
estate mortgage loans (including home equity loans) accounted for 39.2% and
39.5%, respectively, of the total loan portfolio.
The following
table summarizes our real estate loan portfolio as segregated by the type of
property. Property type concentrations are stated as a percentage of year-end
total real estate loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2011
|
|
2010
|
|
|
|
Investor
Real Estate
|
|
Owner
Occupied
Real Estate
|
|
Investor
Real Estate
|
|
Owner
Occupied
Real Estate
|
|
Vacant Land, Construction, and Land
Development
|
|
|
12.2
|
|
|
|
|
|
14.9
|
|
|
|
|
Improved Property
|
|
|
24.5
|
|
|
63.3
|
|
|
23.8
|
|
|
61.3
|
|
Total Real Estate Loans
|
|
|
36.7
|
|
|
63.3
|
|
|
38.7
|
|
|
61.3
|
|
A major
portion of our real estate loan portfolio is centered in the owner occupied
category which carries a lower risk of non-collection than certain segments of
the investor category. Beginning in 2008 and continuing through 2011, we have
worked to reduce our exposure to the higher risk land and construction category
through pro-active work-outs, appropriate charge-offs, or foreclosure.
Approximately 68% of this category was secured by residential real estate at
year-end 2011.
50
Allowance for Loan Losses
Management
believes it maintains the allowance for loan losses at a level sufficient to
provide for the estimated credit losses inherent in the loan portfolio as of
the balance sheet date. Credit losses arise from the borrowers inability or
unwillingness to repay, and from other risks inherent in the lending process
including collateral risk, operations risk, concentration risk, and economic
risk. As such, all related risks of lending are considered when assessing the
adequacy of the allowance. The allowance for loan losses is established through
a provision charged to expense. Loan losses are charged against the allowance
when management believes collection of the principal is unlikely. The allowance
for loan losses is based on managements judgment of overall credit quality.
This is a significant estimate based on a detailed analysis of the loan portfolio.
The balance can and will change based on revisions to our assessment of the
loan portfolios overall credit quality and other risk factors both internal
and external to us.
Management
evaluates the adequacy of the allowance for loan losses on a quarterly basis.
Loans that have been identified as impaired are reviewed for adequacy of
collateral, with a specific reserve assigned to those loans when necessary. A
loan is deemed impaired when, based on current information and events, it is
probable that the company will not be able to collect all amounts due
(principal and interest payments), according to the contractual terms of the
loan agreement. All classified loan relationships that exceed $100,000 are
reviewed for impairment. The evaluation to determine if a loan is impaired is
based on the repayment capacity of the borrower or current payment status of
the loan.
The method
used to assign a specific reserve depends on whether repayment of the loan is
dependent on liquidation of collateral. If repayment is dependent on the sale
of collateral, the reserve is equivalent to the recorded investment in the loan
less the fair value of the collateral after estimated sales expenses. If
repayment is not dependent on the sale of collateral, the reserve is equivalent
to the recorded investment in the loan less the estimated cash flows discounted
using the loans effective interest rate. The discounted value of the cash
flows is based on the anticipated timing of the receipt of cash payments from
the borrower. The reserve allocations for impaired loans are sensitive to the
extent market conditions or the actual timing of cash receipts change.
Once specific
reserves have been assigned to impaired loans, general reserves are assigned to
the remaining portfolio. General reserves are assigned to various homogenous
loan pools, including commercial, commercial real estate, construction,
residential 1-4 family, home equity, and consumer. General reserves are
assigned based on historical loan loss ratios (by loan pool and internal risk
rating) and are adjusted for various internal and external risk factors unique
to each loan pool.
The
unallocated portion of the allowance is monitored on a regular basis and
adjusted based on managements determination of estimation risk. Table 8
analyzes the activity in the allowance over the past five years.
For 2011, our
net charge-offs totaled $23.4 million, or 1.39%, of average loans, compared to
$32.4 million, or 1.77%, for 2010, and $32.6 million, or 1.66%, for 2009. A
$6.0 million reduction in construction loan charge-offs drove the year over
year decline in net charge-offs in 2011. Over the last four years, we have
recorded a cumulative loan loss provision totaling $115.3 million, or 6.0%, of
beginning loans and have recognized cumulative net charge-offs of $102.0
million, or 5.3%. During this period, approximately $38.5 million, or 39%, of
our gross loan losses were related to loans secured by vacant land, primarily
residential real estate property. We believe that our loan losses have now
stabilized, but will remain elevated in 2012 due to the slower pace of economic
recovery in our markets and its impact on our borrowers.
Table 9
provides an allocation of the allowance for loan losses to specific loan types
for each of the past five years. The reserve allocations, as calculated using
the above methodology, are assigned to specific loan categories corresponding
to the type represented within the components discussed.
At year-end
2011, the allowance for loan losses of $31.0 million was 1.91% of outstanding
loans (net of overdrafts) and provided coverage of 41% of nonperforming loans
compared to 2.01% and 54%, respectively, at the end of 2010, and 2.30% and 51%
at the end of 2009. Year over year the reduction in the allowance for loan losses
generally reflects the changing mix of our impaired loan portfolio which is now
much less centered in the residential construction and land categories. Our
exposure to vacant land continued decline in 2011 and 2010 as we resolved
relationships through foreclosure/charge-off or develop work out strategies.
Impaired loans secured by vacant land totaled $7.9 million at year-end 2011
compared to $19.3 million at year-end 2010 and $35.8 million at year-end 2009.
It is managements opinion that the allowance at December 31, 2011 is adequate
to absorb losses inherent in the loan portfolio at year-end.
51
Table
8
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
|
Balance at Beginning of Year
|
|
$
|
35,436
|
|
$
|
43,999
|
|
$
|
37,004
|
|
$
|
18,066
|
|
$
|
17,217
|
|
Reclassification of Unfunded Reserve to
Other Liability
|
|
|
|
|
|
|
|
|
392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-Offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, Financial and Agricultural
|
|
|
1,843
|
|
|
2,118
|
|
|
2,590
|
|
|
1,649
|
|
|
1,462
|
|
Real Estate - Construction
|
|
|
114
|
|
|
5,877
|
|
|
8,031
|
|
|
2,581
|
|
|
166
|
|
Real Estate - Commercial
|
|
|
6,713
|
|
|
8,762
|
|
|
4,417
|
|
|
1,499
|
|
|
709
|
|
Real Estate - Residential
|
|
|
11,870
|
|
|
12,168
|
|
|
13,491
|
|
|
3,787
|
|
|
407
|
|
Real Estate - Home Equity
|
|
|
2,727
|
|
|
3,087
|
|
|
1,632
|
|
|
267
|
|
|
1,022
|
|
Consumer
|
|
|
2,924
|
|
|
3,502
|
|
|
5,912
|
|
|
6,192
|
|
|
3,451
|
|
Total Charge-Offs
|
|
|
26,191
|
|
|
35,514
|
|
|
36,073
|
|
|
15,975
|
|
|
7,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, Financial and Agricultural
|
|
|
387
|
|
|
370
|
|
|
567
|
|
|
331
|
|
|
174
|
|
Real Estate - Construction
|
|
|
14
|
|
|
8
|
|
|
540
|
|
|
4
|
|
|
|
|
Real Estate - Commercial
|
|
|
251
|
|
|
261
|
|
|
53
|
|
|
15
|
|
|
14
|
|
Real Estate - Residential
|
|
|
478
|
|
|
385
|
|
|
525
|
|
|
161
|
|
|
34
|
|
Real Estate - Home Equity
|
|
|
214
|
|
|
555
|
|
|
5
|
|
|
1
|
|
|
2
|
|
Consumer
|
|
|
1,450
|
|
|
1,548
|
|
|
1,753
|
|
|
1,905
|
|
|
1,679
|
|
Total Recoveries
|
|
|
2,794
|
|
|
3,127
|
|
|
3,443
|
|
|
2,417
|
|
|
1,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Charge-Offs
|
|
|
23,397
|
|
|
32,387
|
|
|
32,630
|
|
|
13,558
|
|
|
5,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
|
|
|
18,996
|
|
|
23,824
|
|
|
40,017
|
|
|
32,496
|
|
|
6,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Year
|
|
$
|
31,035
|
|
$
|
35,436
|
|
$
|
43,999
|
|
$
|
37,004
|
|
$
|
18,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Net Charge-Offs to Average Loans
Outstanding
|
|
|
1.39
|
%
|
|
1.77
|
%
|
|
1.66
|
%
|
|
0.71
|
%
|
|
0.27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses as a Percent of
Loans at
End of Year
|
|
|
1.91
|
%
|
|
2.01
|
%
|
|
2.30
|
%
|
|
1.89
|
%
|
|
0.94
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses as a Multiple of
Net
Charge-Offs
|
|
|
1.33
|
x
|
|
1.09
|
x
|
|
1.35
|
x
|
|
2.73
|
x
|
|
3.40
|
x
|
52
Table 9
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
(Dollars in
Thousands)
|
|
Allow-
ance
Amount
|
|
Percent
of Loan
in Each
Category
To Total
Loans
|
|
Allow-
ance
Amount
|
|
Percent
of Loans
in Each
Category
To Total
Loans
|
|
Allow-
ance
Amount
|
|
Percent
of Loans
in Each
Category
To Total
Loans
|
|
Allow-
ance
Amount
|
|
Percent
of Loans
in Each
Category
To Total
Loans
|
|
Allow-
ance
Amount
|
|
Percent
of Loans
in Each
Category
To Total
Loans
|
|
|
Commercial,
Financial
and
Agricultural
|
|
$
|
1,534
|
|
|
8.0
|
%
|
$
|
1,544
|
|
|
8.9
|
%
|
$
|
2,409
|
|
|
9.9
|
%
|
$
|
2,401
|
|
|
10.5
|
%
|
$
|
3,106
|
|
|
10.9
|
%
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
1,133
|
|
|
1.6
|
|
|
2,060
|
|
|
2.5
|
|
|
12,117
|
|
|
5.8
|
|
|
8,973
|
|
|
7.3
|
|
|
3,117
|
|
|
7.4
|
|
Commercial
|
|
|
10,660
|
|
|
39.2
|
|
|
8,645
|
|
|
38.2
|
|
|
8,751
|
|
|
37.4
|
|
|
6,022
|
|
|
33.6
|
|
|
4,372
|
|
|
33.1
|
|
Residential
|
|
|
12,518
|
|
|
24.5
|
|
|
17,046
|
|
|
24.5
|
|
|
14,159
|
|
|
21.7
|
|
|
12,489
|
|
|
24.7
|
|
|
3,733
|
|
|
35.6
|
|
Home Equity
|
|
|
2,392
|
|
|
15.0
|
|
|
2,522
|
|
|
14.3
|
|
|
2,201
|
|
|
12.9
|
|
|
1,091
|
|
|
11.2
|
|
|
|
|
|
|
|
Consumer
|
|
|
1,887
|
|
|
11.7
|
|
|
2,612
|
|
|
11.6
|
|
|
3,457
|
|
|
12.3
|
|
|
5,055
|
|
|
12.8
|
|
|
2,790
|
|
|
13.0
|
|
Not Allocated
|
|
|
911
|
|
|
|
|
|
1,007
|
|
|
|
|
|
905
|
|
|
|
|
|
973
|
|
|
|
|
|
948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
31,035
|
|
|
100.0
|
%
|
$
|
35,436
|
|
|
100.0
|
%
|
$
|
43,999
|
|
|
100.0
|
%
|
$
|
37,004
|
|
|
100.0
|
%
|
$
|
18,066
|
|
|
100.0
|
%
|
Investment Securities
In 2011, our
average investment portfolio increased $89.1 million, or 41.2%, from 2010 and
increased $27.1 million, or 14.3%, from 2009 to 2010. As a percentage of
average earning assets, the investment portfolio represented 13.8% in 2011,
compared to 9.4% in 2010. In 2011, the increase in the average balance of the
investment portfolio was a continuation of the investment strategy that started
in 2010 to deploy a portion of the Banks liquidity. As total net loans have
decreased throughout 2011 and 2010, a portion of this liquidity was utilized
for additional investments, resulting in both higher yields compared to
overnight funds and a larger percentage of earning assets. Additionally in
2010, securities were purchased for pledging deposits which transitioned from
accounts that were guaranteed by the FDIC into products requiring pledging. In
2012, we will closely monitor liquidity levels and pledging requirements to
assess the need to purchase additional investments.
In 2011,
average taxable investments increased $117.0 million, or 92.8%, while
tax-exempt investments decreased $27.9 million, or 30.8%. The mix changed as
high quality tax-exempt securities continued to be in limited supply during
2011 resulting in a portion of the proceeds from maturing tax-exempt securities
being invested in taxable securities (primarily treasuries). Management will
continue to purchase municipal issues as they become available and when it
considers the yield to be attractive.
The investment
portfolio is a significant component of our operations and, as such, it
functions as a key element of liquidity and asset/liability management. As of
December 31, 2011, all securities are classified as available-for-sale which
offers management full flexibility in managing our liquidity and interest rate
sensitivity without adversely impacting our regulatory capital levels. It is
neither managements intent nor practice to participate in the trading of
investment securities for the purpose of recognizing gains and therefore we do
not maintain a trading portfolio. Securities in the available-for-sale
portfolio are recorded at fair value with unrealized gains and losses
associated with these securities recorded net of tax, in the accumulated other
comprehensive income (loss) component of shareowners equity. At December 31,
2011, the investment portfolio maintained a net pre-tax unrealized gain of $1.7
million compared to a net pre-tax unrealized gain of $1.1 million at December
31, 2010. At the end of 2011, 74 of our investment securities had an unrealized
loss totaling $0.8 million. These securities consists of mortgage-backed
securities, SBA securities, and municipal bonds that are in a loss position
because they were acquired when the general level of interest rates for the
respective product type was lower than that on December 31, 2011. All
securities except two have been in a loss position for less than 12 months. One
of the securities in a loss position for more than 12 months is a Ginnie Mae
mortgage-backed security whose loss is not material. The other position is a
preferred bank stock issue which had an unrealized loss of $0.6 million. For
2011, we did not realize any additional other than temporary impairment through
earnings for this security.
The average
maturity of the total portfolio at December 31, 2011 and 2010 was 1.39 and 1.89
years, respectively. Mortgage-backed securities
experienced shorter average lives at the end of 2011 compared to the end of
2010, as prepayment speeds were faster given the current low interest rate
environment. In addition, US Treasuries experienced shorter average lives when
compared to the prior year as the majority of US Treasuries were purchased in
late 2010 with minor activity experienced in 2011. See Table 10 for a breakdown
of maturities by investment type.
53
The weighted
average taxable equivalent yield of the investment portfolio at December 31,
2011 was 1.41%, versus 1.59% in 2010. This lower yield was a result of matured
bonds being invested at lower market rates during 2011. Our bond portfolio
contained no investments in obligations, other than U.S. Governments, of any
one state, municipality, political subdivision or any other issuer that
exceeded 10% of our shareowners equity at December 31, 2011. New investments
continue to be made selectively into high quality bonds.
Table 10 and Note 2 in the
Notes to Consolidated Financial Statements present a detailed analysis of our
investment securities as to type, maturity and yield.
Table 10
MATURITY
DISTRIBUTION OF INVESTMENT SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
(Dollars in Thousands)
|
|
Amortized
Cost
|
|
Market
Value
|
|
Weighted
(1)
Average
Yield
|
|
Amortized
Cost
|
|
Market
Value
|
|
Weighted
(1)
Average
Yield
|
|
Amortized
Cost
|
|
Market
Value
|
|
Weighted
(1)
Average
Yield
|
|
|
U.S. GOVERNMENTS -TREASURY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in 1 year or less
|
|
$
|
100,306
|
|
$
|
100,591
|
|
|
0.66
|
%
|
$
|
9,050
|
|
$
|
9,091
|
|
|
1.64
|
%
|
$
|
11,034
|
|
$
|
11,111
|
|
|
2.04
|
%
|
Due over 1 year to 5 years
|
|
|
67,695
|
|
|
68,873
|
|
|
1.32
|
|
|
151,863
|
|
|
153,060
|
|
|
0.96
|
|
|
11,236
|
|
|
11,333
|
|
|
1.53
|
|
Due over 5 years to 10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due over 10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
168,001
|
|
|
169,464
|
|
|
0.94
|
|
|
160,913
|
|
|
162,151
|
|
|
1.00
|
|
|
22,270
|
|
|
22,444
|
|
|
1.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GOVERNMENTS - AGENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in 1 year or less
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due over 1 year to 5 years
|
|
|
14,758
|
|
|
14,737
|
|
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due over 5 years to 10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due over 10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
14,758
|
|
|
14,737
|
|
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATES & POLITICAL SUBDIVISIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in 1 year or less
|
|
|
25,390
|
|
|
25,438
|
|
|
1.31
|
|
|
52,987
|
|
|
53,189
|
|
|
1.97
|
|
|
58,987
|
|
|
59,477
|
|
|
3.90
|
|
Due over 1 year to 5 years
|
|
|
33,556
|
|
|
33,656
|
|
|
1.01
|
|
|
26,003
|
|
|
26,110
|
|
|
1.54
|
|
|
47,468
|
|
|
48,073
|
|
|
2.49
|
|
Due over 5 years to 10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due over 10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
58,946
|
|
|
59,094
|
|
|
1.12
|
|
|
78,990
|
|
|
79,299
|
|
|
1.84
|
|
|
106,455
|
|
|
107,550
|
|
|
3.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MORTGAGE-BACKED SECURITIES(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in 1 year or less
|
|
|
2,104
|
|
|
2,136
|
|
|
3.60
|
|
|
7,377
|
|
|
7,488
|
|
|
3.85
|
|
|
8,400
|
|
|
8,506
|
|
|
3.91
|
|
Due over 1 year to 5 years
|
|
|
48,481
|
|
|
49,073
|
|
|
2.12
|
|
|
31,717
|
|
|
32,034
|
|
|
2.70
|
|
|
24,742
|
|
|
25,398
|
|
|
4.01
|
|
Due over 5 years to 10 years
|
|
|
1,190
|
|
|
1,288
|
|
|
4.89
|
|
|
17,005
|
|
|
16,695
|
|
|
2.27
|
|
|
233
|
|
|
239
|
|
|
4.44
|
|
Due over 10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
51,775
|
|
|
52,497
|
|
|
2.34
|
|
|
56,099
|
|
|
56,217
|
|
|
2.72
|
|
|
33,375
|
|
|
34,143
|
|
|
3.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in 1 year or less
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due over 1 year to 5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due over 5 years to 10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due over 10 years(3)
|
|
|
11,957
|
|
|
11,357
|
|
|
2.88
|
|
|
12,664
|
|
|
12,064
|
|
|
2.58
|
|
|
12,536
|
|
|
12,536
|
|
|
6.18
|
|
TOTAL
|
|
|
11,957
|
|
|
11.357
|
|
|
2.88
|
|
|
12,664
|
|
|
12,064
|
|
|
2.58
|
|
|
12,536
|
|
|
12,536
|
|
|
6.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENT SECURITIES
|
|
$
|
305,437
|
|
$
|
307,149
|
|
|
1.30
|
%
|
$
|
308,666
|
|
$
|
309,731
|
|
|
1.59
|
%
|
$
|
174,636
|
|
$
|
176,673
|
|
|
3.43
|
%
|
|
|
(1)
|
Weighted
average yields are calculated on the basis of the amortized cost of the
security. The weighted average yields on tax-exempt obligations are computed
on a taxable equivalent basis using a 35% tax rate.
|
|
|
(2)
|
Based on
weighted average life.
|
|
|
(3)
|
Federal
Home Loan Bank Stock and Federal Reserve Bank Stock are included in this
category for weighted average yield, but do not have stated maturities.
|
54
AVERAGE MATURITY
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31,
|
|
(In Years)
|
|
2011
|
|
2010
|
|
2009
|
|
U.S. Government Treasury
|
|
|
1.07
|
|
|
1.77
|
|
|
0.95
|
|
U.S. Government Agency
|
|
|
3.13
|
|
|
|
|
|
|
|
States and Political Subdivisions
|
|
|
1.24
|
|
|
0.85
|
|
|
0.96
|
|
Mortgage-Backed Securities
|
|
|
2.70
|
|
|
3.68
|
|
|
1.82
|
|
Other Securities
|
|
|
2.88
|
|
|
|
|
|
|
|
TOTAL
|
|
|
1.39
|
|
|
1.89
|
|
|
1.13
|
|
Deposits and Funds Purchased
Average total deposits for
the year were $2.082 billion, a decrease of $110.7 million, or 5.1%, compared
to the same period in 2010 and increased $199.9 million, or 10.0%, compared
from 2009 to 2010. Deposits decreased primarily by a reduction in certificates
of deposit. Additionally, a decrease resulting from existing clients moving
from our Guaranteed Now Account (GNA) product to repurchase agreements
occurred late in the fourth quarter of 2010 as further discussed below.
Noninterest bearing demand and savings accounts increased, partially offsetting
the above mentioned declines in GNA and certificates of deposit. The increase
experienced in 2010 was a result of growth in all deposit categories except
certificates of deposit.
Pursuant to changes in the
FDICs Temporary Liquidity Guarantee Program, our GNA product was discontinued
during the fourth quarter of 2010. Approximately $95 million in balances for
this product remained in the NOW category, $95 million migrated to the noninterest
bearing DDA category, and $60 million in balances moved to repurchase
agreements as of the end of December 2010.
We continue to pursue
prudent pricing discipline to manage the mix of our deposits. Therefore, we are
not attempting to compete with higher rate paying competitors for deposits. We
continue to experience a favorable shift in the mix of our deposits as higher
cost certificates of deposit balances are replaced with lower rate non-maturity
deposits and noninterest bearing demand accounts.
Table 2 provides an analysis
of our average deposits, by category, and average rates paid thereon for each
of the last three years. Table 11 reflects the shift in our deposit mix over
the last year and Table 12 provides a maturity distribution of time deposits in
denominations of $100,000 and over.
Average short-term
borrowings, which include federal funds purchased, securities sold under
agreements to repurchase, Federal Home Loan Bank (FHLB) advances (maturing in
less than one year), and other borrowings, increased $40.2 million, or 144.3%
in 2011. The growth is attributable to an increase in repurchase agreements of
$42.2 million and a $3.0 million increase in other borrowings primarily
attributable to a reclassification of an FHLB advance from long-term to
short-term. The year-over-year increase in repurchase agreements was
attributable to the migration of deposits from the government guarantee NOW
account. See Note 8 in the Notes to Consolidated Financial Statements for
further information on short-term borrowings.
Strategically, we continue
to focus on the value of our deposit franchise, which produces a strong base of
core deposits with minimal reliance on wholesale funding.
Table 11
SOURCES OF DEPOSIT
GROWTH
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Average
Balances - Dollars in Thousands)
|
|
2010
to
2011
Change
|
|
Percentage
of Total
Change
|
|
Components
of
Total Deposits
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Noninterest Bearing Deposits
|
|
$
|
105,542
|
|
|
95.3
|
%
|
|
27.3
|
%
|
|
21.1
|
%
|
|
21.0
|
%
|
NOW Accounts
|
|
|
(114,945
|
)
|
|
(103.8
|
)
|
|
36.0
|
|
|
39.4
|
|
|
35.7
|
|
Money Market Accounts
|
|
|
(38,515
|
)
|
|
(34.8
|
)
|
|
13.6
|
|
|
14.6
|
|
|
16.1
|
|
Savings
|
|
|
19,856
|
|
|
17.9
|
|
|
7.3
|
|
|
6.0
|
|
|
6.1
|
|
Time Deposits
|
|
|
(82,678
|
)
|
|
(74.6
|
)
|
|
15.8
|
|
|
18.9
|
|
|
21.1
|
|
Total Deposits
|
|
$
|
(110,740
|
)
|
|
(100.0
|
)%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
55
Table 12
MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 OR OVER
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
Time
Certificates of
Deposit
|
|
Percent
|
|
(Dollars
in Thousands)
|
|
|
|
Three months or less
|
|
$
|
25,963
|
|
|
30.3
|
%
|
Over three through six months
|
|
|
18,126
|
|
|
21.2
|
|
Over six through twelve months
|
|
|
30,616
|
|
|
35.7
|
|
Over twelve months
|
|
|
10,951
|
|
|
12.8
|
|
Total
|
|
$
|
85,656
|
|
|
100.0
|
%
|
Market Risk and Interest Rate Sensitivity
Overview.
Market risk arises from changes in interest
rates, exchange rates, commodity prices, and equity prices. We have risk
management policies to monitor and limit exposure to market risk and do not
participate in activities that give rise to significant market risk involving
exchange rates, commodity prices, or equity prices. In asset and liability
management activities, our policies are designed to minimize structural
interest rate risk.
Interest Rate Risk Management.
Our
net income is largely dependent on net interest income. Net interest income is
susceptible to interest rate risk to the degree that interest-bearing
liabilities mature or reprice on a different basis than interest-earning
assets. When interest-bearing liabilities mature or reprice more quickly than
interest-earning assets in a given period, a significant increase in market
rates of interest could adversely affect net interest income. Similarly, when
interest-earning assets mature or reprice more quickly than interest-bearing
liabilities, falling interest rates could result in a decrease in net interest
income. Net interest income is also affected by changes in the portion of
interest-earning assets that are funded by interest-bearing liabilities rather
than by other sources of funds, such as noninterest-bearing deposits and
shareowners equity.
We have established a
comprehensive interest rate risk management policy, which is administered by
managements Asset Liability Management Committee (ALCO). The policy
establishes limits of risk, which are quantitative measures of the percentage
change in net interest income (a measure of net interest income at risk) and
the fair value of equity capital (a measure of economic value of equity (EVE)
at risk) resulting from a hypothetical change in interest rates for maturities
from one day to 30 years. We measure the potential adverse impacts that
changing interest rates may have on our short-term earnings, long-term value,
and liquidity by employing simulation analysis through the use of computer modeling.
The simulation model captures optionality factors such as call features and
interest rate caps and floors imbedded in investment and loan portfolio
contracts. As with any method of gauging interest rate risk, there are
certain shortcomings inherent in the interest rate modeling methodology used by
us. When interest rates change, actual movements in different categories of
interest-earning assets and interest-bearing liabilities, loan prepayments, and
withdrawals of time and other deposits, may deviate significantly from
assumptions used in the model. Finally, the methodology does not measure or
reflect the impact that higher rates may have on adjustable-rate loan clients
ability to service their debts, or the impact of rate changes on demand for loan
and deposit products.
We prepare a current base
case and three alternative simulations, at least once a quarter, and report the
analysis to ALCO, our Market Risk Oversight Committee (MROC) and the Board of
Directors. In addition, more frequent forecasts may be produced when interest
rates are particularly uncertain or when other business conditions so dictate.
Our interest rate risk
management goal is to avoid unacceptable variations in net interest income and
capital levels due to fluctuations in market rates. Management attempts to
achieve this goal by balancing, within policy limits, the volume of floating-rate
liabilities with a similar volume of floating-rate assets, by keeping the
average maturity of fixed-rate asset and liability contracts reasonably
matched, by maintaining a pool of administered core deposits, and by adjusting
our rates to market conditions on a continuing basis.
The balance sheet is subject
to testing for interest rate shock possibilities to indicate the inherent
interest rate risk. Average interest rates are shocked by plus or minus 100,
200, and 300 basis points (bp), although we may elect not to use particular
scenarios that we determined are impractical in a current rate environment. It
is managements goal to structure the balance sheet so that net interest
earnings at risk over a 12-month period and the economic value of equity at
risk do not exceed policy guidelines at the various interest rate shock levels.
We augment our interest rate
shock analysis with alternative external interest rate scenarios on a quarterly
basis. These alternative interest rate scenarios may include non-parallel rate
ramps.
Analysis.
Measures
of net interest income at risk produced by simulation analysis are indicators
of an institutions short-term performance in alternative rate environments.
These measures are typically based upon a relatively brief period, usually one
year. They do not necessarily indicate the long-term prospects or economic
value of the institution.
56
ESTIMATED CHANGES IN NET INTEREST INCOME (1)
|
|
|
|
|
Changes in Interest Rates
|
+300 bp
|
+200 bp
|
+100 bp
|
-100 bp
|
|
|
|
|
|
Policy Limit
|
+/-10.0%
|
+/-7.5%
|
+/-5.0%
|
+/-5.0%
|
December 31, 2011
|
-3.1%
|
-0.5%
|
0.9%
|
-0.4%
|
December 31, 2010
|
-9.7%
|
-5.5%
|
-1.9%
|
-1.0%
|
The Net Interest Income at Risk
position improved for the month ended December 2011, when compared to the same
period in 2010, for all rate scenarios. Our largest exposure is at the +300 bp
level, with a measure of -3.1%, which is still within our policy limit of
-10.0%. The year-over-year favorable variance is primarily attributable to a
higher level of overnight funds, coupled with a larger number of maturing,
short-term securities reinvested at higher shocked rates, and a lower level
of short-term borrowings. All measures of net interest income at risk are
within our prescribed policy limits.
The measures
of equity value at risk indicate our ongoing economic value by considering the
effects of changes in interest rates on all of our cash flows, and discounting
the cash flows to estimate the present value of assets and liabilities. The
difference between these discounted values of the assets and liabilities is the
economic value of equity, which, in theory, approximates the fair value of our
net assets.
ESTIMATED CHANGES IN ECONOMIC VALUE OF EQUITY
(1)
|
|
|
|
|
Changes in Interest Rates
|
+300 bp
|
+200 bp
|
+100 bp
|
-100 bp
|
|
|
|
|
|
Policy Limit
|
+/-12.5%
|
+/-10.0%
|
+/-7.5%
|
+/-7.5%
|
December 31, 2011
|
4.0%
|
7.8%
|
7.3%
|
-4.9%
|
December 31, 2010
|
-1.2%
|
2.4%
|
3.5%
|
-6.6%
|
Our risk profile, as measured
by EVE, improved for the month ended December 2011, when compared to the same
period in 2010, for both the down rate and up rate scenarios. The favorable
variance between periods is attributable to a change in several key
assumptions, in addition to decreases in both the Treasury and FHLB curve,
resulting in improved loan and non-maturity deposit values. When comparing the
up 300 scenario to the up 100 and 200 scenarios, the EVE measurement decreases
to 4.0% which is primarily attributable to the varied assumptions on the
non-maturity deposits in the rising rate scenarios. Based on historical data,
interest rates on non-maturity deposits are increased at varied percentages in
the rising rate scenarios, with the up 300 scenario being the most aggressive.
All measures of economic value of equity are within our prescribed policy
limits.
|
|
(1)
|
Down 200 and 300 rate scenarios have been excluded due to the current
historically low interest rate environment.
|
LIQUIDITY
AND CAPITAL RESOURCES
Liquidity
In general
terms, liquidity is a measurement of our ability to meet our cash needs. Our
objective in managing our liquidity is to maintain our ability to meet loan
commitments, purchase securities or repay deposits and other liabilities in
accordance with their terms, without an adverse impact on our current or future
earnings. Our liquidity strategy is guided by policies that are formulated and
monitored by our ALCO and senior management, and which take into account the marketability
of assets, the sources and stability of funding and the level of unfunded
commitments. We regularly evaluate all of our various funding sources with an
emphasis on accessibility, stability, reliability and cost-effectiveness. For
the years ended December 31, 2011 and 2010, our principal source of
funding has been our client deposits, supplemented by our short-term and
long-term borrowings, primarily from securities sold under repurchase
agreements, federal funds purchased and FHLB borrowings. We believe that the
cash generated from operations, our borrowing capacity and our access to
capital resources are sufficient to meet our future operating capital and
funding requirements.
As of December
31, 2011, we have the ability to generate $741.8 million in additional
liquidity through all of our available resources. In addition to the primary
borrowing outlets mentioned above, we also have the ability to generate
liquidity by borrowing from the Federal Reserve Discount Window and through
brokered deposits. Management recognizes the importance of maintaining
liquidity and has developed a Contingent Liquidity Plan, which addresses
various liquidity stress levels and our response and action based on the level
of severity. We periodically test our credit facilities for access to the
funds, but also understand that as the severity of the liquidity level
increases certain credit facilities may no longer be available. A liquidity
stress test is completed on a quarterly basis based on events that could
potentially occur at the Bank with the results reported to ALCO, our Market
Risk Oversight Committee and the Board of Directors. The liquidity available to
us is considered sufficient to meet our ongoing needs.
57
We view our
investment portfolio as a liquidity source and have the option to pledge the
portfolio as collateral for borrowings or deposits, and/or sell selected
securities. The portfolio consists of debt issued by the U.S. Treasury, U.S.
governmental agencies, and municipal governments. The weighted average life of
the portfolio is 1.39 years and as of year-end had a net unrealized pre-tax
gain of $1.7 million.
Our average
liquidity (defined as funds sold plus interest bearing deposits with other
banks less funds purchased) for the fourth quarter of 2011 reflects a net
overnight funds sold position
of $191.8 million compared to an average net overnight funds sold position of $231.7 million
in the prior quarter and an average overnight funds sold position of $172.7 million in
the fourth quarter of 2010. The lower balance when compared to the third
quarter of 2011 reflects declining deposits (public funds and certificates of
deposit) and lower levels of short-term borrowings, partially offset by a
decrease in the loan portfolio. The higher balance as compared to the fourth
quarter of 2010 is primarily attributable to a net reduction in loans and an
increase in repurchase agreements, partially offset by a decline in deposits,
borrowings and the deployment of funds to the investment portfolio.
Capital
expenditures are expected to approximate $4.0 million over the next 12 months,
which consist primarily of ATM replacements, furniture and fixtures, and
technology purchases. Management believes that these capital expenditures will
be funded with existing resources without impairing our ability to meet our
on-going obligations.
Borrowings
At December
31, 2011, advances from the FHLB consisted of $44.6 million in outstanding debt
consisting of 47 notes. In 2011, the Bank made FHLB advance payments totaling
approximately $3.3 million, repaid three advances for $13.0 million, and
obtained one new FHLB advance totaling $0.8 million. The FHLB notes are
collateralized by a blanket floating lien on all of our 1-4 family residential
mortgage loans, commercial real estate mortgage loans, and home equity mortgage
loans.
Table 13
CONTRACTUAL CASH OBLIGATIONS
Table 13 sets
forth certain information about contractual cash obligations at December 31,
2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period
|
|
(Dollars
in Thousands)
|
|
< 1 Yr
|
|
> 1 3 Yrs
|
|
> 3 5 Yrs
|
|
> 5 Years
|
|
Total
|
|
Federal Home
Loan Bank Advances
|
|
$
|
3,225
|
|
$
|
21,990
|
|
$
|
9,059
|
|
$
|
10,332
|
|
$
|
44,606
|
|
Subordinated
Notes Payable
|
|
|
|
|
|
|
|
|
|
|
|
62,887
|
|
|
62,887
|
|
Operating
Lease Obligations
|
|
|
702
|
|
|
987
|
|
|
826
|
|
|
3,965
|
|
|
6,480
|
|
Time Deposit
Maturities
|
|
|
250,802
|
|
|
33,228
|
|
|
3,531
|
|
|
2,279
|
|
|
289,840
|
|
Liability
for Unrecognized Tax Benefits
|
|
|
1,169
|
|
|
2,399
|
|
|
1,538
|
|
|
522
|
|
|
5,628
|
|
Total
Contractual Cash Obligations
|
|
$
|
255,898
|
|
$
|
58,604
|
|
$
|
14,954
|
|
$
|
79,985
|
|
$
|
409,441
|
|
We have issued two junior
subordinated deferrable interest notes to wholly-owned Delaware statutory
trusts. The first note for $30.9 million was issued to CCBG Capital Trust I in
November 2004. The second note for $32.0 million was issued to CCBG Capital
Trust II in May 2005. See Note 9 in the Notes to Consolidated Financial
Statements for additional information on these borrowings. The interest payment
for the CCBG Capital Trust I borrowing is due quarterly and adjusts quarterly
to a variable rate of LIBOR plus a margin of 1.90%. This note matures on
December 31, 2034. The interest payment for the CCBG Capital Trust II borrowing
is due quarterly and will adjust annually to a variable rate of LIBOR plus a
margin of 1.80%. This note matures on June 15, 2035. The proceeds of these
borrowings were used to partially fund acquisitions. Under the terms of
each trust preferred securities note, in the event of default or if we elect
to defer interest on the note, we may not, with certain exceptions, declare or
pay dividends or make distributions on our capital stock or purchase or acquire
any of our captial stock. As of February 2012, in
consultation with the Federal Reserve, we elected to defer the interest
payments on the notes. We will, however, continue the accrual of the interest
on the notes in accordance with our contractual obligations.
In accordance
with the Holding Company Resolution, CCBG must receive approval from the
Federal Reserve prior to incurring new debt, refinancing existing debt, or
making interest payments on its trust preferred securities.
Capital
Shareowners
equity declined by $7.1 million, or 2.7%, from $259.0 million at December 31,
2010 to $251.9 million at December 31, 2011. During 2011, shareowners equity
was positively impacted by net income of $4.9 million, the issuance of stock
totaling approximately $0.9 million, and a $0.4 million increase in our net
unrealized gain on securities. Dividends paid of $5.1 million and an $8.2
million increase in the accumulated other comprehensive loss for our pension
plan reduced shareowners equity.
58
Shareowners
equity as of December 31, for each of the last three years is presented below:
|
|
|
|
|
|
|
|
(Dollars
in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Common Stock
|
|
|
172
|
|
|
171
|
|
|
170
|
|
Additional Paid-in Capital
|
|
|
37,838
|
|
|
36,920
|
|
|
36,099
|
|
Retained Earnings
|
|
|
237,461
|
|
|
237,679
|
|
|
246,460
|
|
Subtotal
|
|
|
275,471
|
|
|
274,770
|
|
|
282,729
|
|
Accumulated Other Comprehensive Loss, Net of
Tax
|
|
|
(23,529
|
)
|
|
(15,751
|
)
|
|
(14,830
|
)
|
Total Shareowners Equity
|
|
$
|
251,942
|
|
$
|
259,019
|
|
$
|
267,899
|
|
We continue to maintain a
strong capital position. The ratio of shareowners equity to total assets at
year-end was 9.54%, 9.88%, and 9.89%, in 2011, 2010, and 2009, respectively.
Management believes its strong capital base has offered protection during the
course of the current economic downturn.
We are subject
to risk-based capital guidelines that measure capital relative to risk weighted
assets and off-balance sheet financial instruments. Capital guidelines issued
by the Federal Reserve require bank holding companies to have a minimum total
risk-based capital ratio of 8.00%, with at least half of the total capital in
the form of Tier I Capital. As of December 31, 2011, we exceeded these capital
guidelines with a total risk-based capital ratio of 15.32% and a Tier I capital
ratio of 13.96%, compared to 14.59% and 13.24%, respectively, in 2010. As
allowed by Federal Reserve capital guidelines the trust preferred securities
issued by CCBG Capital Trust I and CCBG Capital Trust II are included as Tier I
Capital in our capital calculations previously noted. See Note 9 in the Notes
to Consolidated Financial Statements for additional information on our two
trust preferred security offerings. See Note 14 in the Notes to Consolidated
Financial Statements for additional information as to our capital adequacy.
A leverage
ratio is also used in connection with the risk-based capital standards and is
defined as Tier I Capital divided by average assets. The minimum leverage ratio
under this standard is 3% for the highest-rated bank holding companies which
are not undertaking significant expansion programs. A higher standard may be
required for other companies, depending upon their regulatory ratings and
expansion plans. On December 31, 2011, we had a leverage ratio of 10.26%
compared to 10.10% in 2010.
At December
31, 2011, our common stock had a book value of $14.68 per diluted share
compared to $15.15 in 2010. Book value is impacted by the net unrealized gains
and losses on investment securities available-for-sale. At December 31, 2011,
the net unrealized gain was $1.1 million compared to $0.7 million in 2010. Book
value is impacted by the recording of our unfunded pension liability through
other comprehensive income in accordance with Accounting Standards Codification
Topic 715. At December 31, 2011, the net pension liability reflected in other
comprehensive income was $24.6 million compared to $16.4 million at December
31, 2010. The increase in our unfunded pension liability was driven by a
reduction in the discount rate used for computing the interest cost for our
pension plan and a lower than anticipated return on the plans assets.
Our Board of
Directors has authorized the repurchase of up to 2,671,875 shares of our
outstanding common stock. The purchases are made in the open market or in
privately negotiated transactions. To date, we have repurchased a total of
2,520,130 shares at an average purchase price of $25.19 per share. During 2011
and 2010, we did not repurchase any shares. In 2009, we repurchased 145,888
shares at an average purchase price of $10.65. We must seek prior approval from
the Federal Reserve before repurchasing any additional shares of our common
stock.
We offer an
Associate Incentive Plan under which certain associates are eligible to earn
equity based awards based upon achieving established performance goals. In 2011
and 2010, we issued no shares under this plan as the financial performance goal
for each year was not achieved.
We also offer
stock purchase plans, which permit our associates and directors to purchase
shares at a 10% discount. In 2011, 60,082 shares, valued at approximately $0.7
million (before 10% discount), were issued under these plans.
Dividends
Adequate
capital and financial strength is paramount to our stability and the stability
of our subsidiary bank. Cash dividends declared and paid should not place
unnecessary strain on our capital levels. When determining the level of
dividends the following factors are considered:
|
|
|
|
|
Compliance
with state and federal laws and regulations;
|
|
|
|
|
|
Our capital
position and our ability to meet our financial obligations;
|
|
|
|
|
|
Projected
earnings and asset levels; and
|
|
|
|
|
|
The ability
of the Bank and us to fund dividends.
|
59
For 2011, we
declared and paid dividends totaling $.30 per share. Dividends declared and
paid totaled $.49 per share in 2010 and $.76 per share in 2009. Dividends
declared per share were reduced in the second quarter of 2010 and
eliminated in the fourth quarter of 2011 to preserve capital given the uncertain economic conditions.
See Item 1. Business-About-Us-Regulatory Matter. For 2011,
2010, and 2009, our dividend payout ratio was not meaningful as our dividends
exceeded our earnings.
Inflation
The impact of
inflation on the banking industry differs significantly from that of other
industries in which a large portion of total resources are invested in fixed
assets such as property, plant and equipment.
Assets and
liabilities of financial institutions are virtually all monetary in nature, and
therefore are primarily impacted by interest rates rather than changing prices.
While the general level of inflation underlies most interest rates, interest
rates react more to changes in the expected rate of inflation and to changes in
monetary and fiscal policy. Net interest income and the interest rate spread
are good measures of our ability to react to changing interest rates and are
discussed in further detail in the section entitled Results of Operations.
OFF-BALANCE SHEET ARRANGEMENTS
We do not
currently engage in the use of derivative instruments to hedge interest rate
risks. However, we are a party to financial instruments with off-balance sheet
risks in the normal course of business to meet the financing needs of our
clients.
At December
31, 2011, we had $295.5 million in commitments to extend credit and $10.9
million in standby letters of credit. 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 may expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by us to guarantee
the performance of a client to a third party. We use the same credit policies
in establishing commitments and issuing letters of credit as we do for
on-balance sheet instruments.
If commitments
arising from these financial instruments continue to require funding at
historical levels, management does not anticipate that such funding will
adversely impact our ability to meet on-going obligations. In the event these
commitments require funding in excess of historical levels, management believes
current liquidity, investment security maturities, available advances from the
FHLB and Federal Reserve Bank provide a sufficient source of funds to meet
these commitments.
60
FOURTH QUARTER 2011 FINANCIAL RESULTS
Results of Operations
We realized a
net loss of $0.5 million, or $0.03 per diluted share, for the fourth quarter of
2011, compared to net income of $2.0 million, or $0.12 per diluted share for
the third quarter of 2011. The reduction in earnings reflects lower operating
revenues of $1.0 million, a $3.9 million increase in the loan loss provision
and higher noninterest expense of $0.5 million, partially offset by lower
income taxes of $2.9 million.
Tax equivalent
net interest income for the fourth quarter of 2011 was $22.6 million compared
to $23.3 million for the third quarter of 2011. The decrease of $0.7 million in
tax equivalent net interest income compared to the third quarter of 2011 was
due to a reduction in loan income attributable to declining loan balances, an
increase in foregone interest on nonaccrual loans and continued unfavorable
asset repricing, partially offset by lower interest expense. The lower interest
expense reflects the reduction in deposit rates enacted late in the third
quarter of 2011. The rate change affected all interest bearing deposit
categories with the exception of savings.
The net
interest margin for the fourth quarter of 2011 was 4.17%, a decrease of 3 basis
points from the third quarter of 2011. The decrease in the margin was
attributable to the shift in our earning asset mix and unfavorable asset
repricing, partially offset by a lower average cost of funds.
The provision
for loan losses for the fourth quarter of 2011 was $7.6 million compared to
$3.7 million in the third quarter of 2011. The increase in the provision was
driven by a higher level of general reserves reflective of an increase in the
level of internally classified loans, delinquent loans and higher loan loss
factors. Net charge-offs for the fourth quarter of 2011
totaled $6.2 million, or 1.50% of average loans, compared to $5.1 million, or
1.22%, in the third quarter of 2011. At year-end 2011, the allowance for loan
losses of $31.0 million was 1.91% of outstanding loans (net of overdrafts) and
provided coverage of 41% of nonperforming loans compared to 1.79% and 56%,
respectively, at the end of the third quarter of 2011.
Noninterest
income for the fourth quarter of 2011 totaled $13.9 million, a decrease of $0.3
million, or 2.2%, from the third quarter of 2011. Lower deposit fees of $0.1
million, bank card fees of $0.1 million and other income of $0.3 million,
partially offset by higher mortgage banking fees of $0.2 million, drove the
decline from the third quarter of 2011. Other income declined due to a lower
level of gains from the sale of OREO properties and a third quarter interest
payment received from the IRS related to the previous overpayment of income
taxes. Mortgage banking fees increased due to higher loan production reflective
of a slight pick-up in home sales in our markets during the later portion of
the year.
Noninterest
expense for the fourth quarter of 2011 totaled $31.1 million, an increase of
$0.5 million over the third quarter of 2011. The increase from the third
quarter was primarily due to higher OREO expense of $0.9 million and other
expense of $0.4 million, partially offset by lower salary/associate benefit
expense of $0.5 million and occupancy expense of $0.2 million. The higher OREO
expense reflects valuation adjustments for several larger OREO properties
during the fourth quarter. Advertising expense increased due to increased
public relations activities and targeted promotions for the More Than Your
Bank, Your Banker campaign. Lower salary/benefit expense primarily reflects the
fourth quarter reversal of expense for our stock compensation award due to our
budgeted earnings goal not being met for the year. Occupancy expense declined
due to lower property tax expense reflective of general decline in property
assessments that were finalized during the fourth quarter. A reduction in
utilities expense also favorably impacted our occupancy expense and reflects a
reduction in the energy rate in our Tallahassee market as well as ongoing
energy initiatives to retrofit lighting fixtures throughout the company.
We realized a
tax benefit of $1.8 million in the fourth quarter of 2011 compared to income
tax expense of $1.0 million for the third quarter of 2011. Lower taxable income
and the favorable resolution of certain tax contingencies totaling $1.0 million
drove the variance from the previous quarter.
Financial Condition
Average
earning assets were $2.146 billion for the fourth quarter of 2011, a decrease
of $56.5 million, or 2.6% from the third quarter of 2011. The decrease was
attributable to a reduction in the level of deposits (primarily seasonal in
nature) and the resolution of problem loans as they were charged off or
transferred to the other real estate category OREO. Period over period, average
deposits declined $28.9 million and average loans declined by $21.0 million.
Loan balances
continue to decline throughout our portfolio, driven primarily by a reduction
in the commercial real estate, residential and commercial loan categories. The
loan portfolio has been impacted by weak loan demand attributable to the lack
of consumer confidence and a slow economic recovery. In addition to lower
production, normal amortization and payoffs, the resolution of problem loans
(which has the effect of lowering the loan portfolio as loans are either
charged off or transferred to the OREO category) also contributed to the
overall decline. During the fourth quarter of 2011, loan charge-offs and loans
transferred to OREO accounted for $13.1 million, or 45%, of the net reduction
in period-end loans of $29.0 million.
61
Nonperforming
assets (including nonaccrual loans and OREO) totaled $137.6 million at year-end
2011, an increase of $23 million from the third quarter of 2011. The increase
in nonperforming assets compared to the prior quarter was driven by a higher
level of nonaccrual loans added during the fourth quarter of 2011, generally
reflective of the prolonged economic recovery in our markets and its impact on
our borrowers. Nonaccrual loans totaled $75.0 million at the end of the fourth
quarter of 2011, an increase of $21.6 million from the third quarter of 2011.
Nonaccrual loan inflow during the fourth quarter of 2011 was primarily
comprised of loans secured by residential 1-4 family real estate, commercial
real estate, and farm property. Five relationships constituted $16.9 million of
the $21.6 million increase. OREO balances totaled $62.6 million at year-end
2011 compared to $61.2 million at the end of the third quarter of 2011.
Nonperforming assets represented 5.21% of total assets at December 31, 2011,
compared to 4.54% at September 30, 2011.
Average total
deposits were $2.033 billion for the fourth quarter of 2011, a decrease of
$28.9 million, or 1.4%, from the third quarter of 2011. The reduction was
primarily in the certificates of deposit and NOW account categories. The variance
in the NOW account category reflects an expected seasonal fourth quarter
variation in our public funds balances. We continue to experience a favorable
shift in the mix of our deposits as higher cost certificates of deposit
balances are replaced with lower rate non-maturity deposits and noninterest
bearing demand accounts.
We maintained
an average net overnight funds (deposits with banks plus fed funds sold less
fed funds purchased) sold position
of $191.8 million during the fourth quarter of 2011 compared to an average net
overnight funds sold position
of $231.7 million in the prior quarter. The lower balance when compared to the
third quarter of 2011 reflects declining deposits (public funds and
certificates of deposit) and lower levels of short-term borrowings, partially
offset by a decrease in the loan portfolio.
62
ACCOUNTING POLICIES
Critical Accounting Policies
The
consolidated financial statements and accompanying Notes to Consolidated
Financial Statements are prepared in accordance with accounting principles
generally accepted in the United States of America, which require us to make
various estimates and assumptions (see Note 1 in the Notes to Consolidated
Financial Statements). We believe that, of our significant accounting policies,
the following may involve a higher degree of judgment and complexity.
Allowance for Loan Losses
.
The allowance for loan losses is a reserve established through a provision for
loan losses charged to expense, which represents managements best estimate of
probable losses within the existing portfolio of loans. The allowance is that
amount considered adequate to absorb losses inherent in the loan portfolio
based on managements evaluation of credit risk as of the balance sheet date.
The allowance
for loan losses includes allowance allocations calculated in accordance with
U.S. GAAP. The level of the allowance reflects managements continuing
evaluation of specific credit risks, loan loss experience, current loan
portfolio quality, present economic conditions and unidentified losses inherent
in the current loan portfolio, as well as trends in the foregoing. This
evaluation is inherently subjective, as it requires estimates that are
susceptible to significant revision as more information becomes available.
The Companys
allowance for loan losses consists of three components: (i) specific valuation
allowances established for probable losses on specific loans deemed impaired;
(ii) valuation allowances calculated for specific homogenous loan pools based
on, but not limited to, historical loan loss experience, current economic and
market conditions, levels of past due loans, and levels of problem loans; and
(iii) an unallocated allowance that reflects managements determination of
estimation risk.
Our financial
results are affected by the changes in and the absolute level of the allowance
for loan losses. This estimation process is judgmental and requires an estimate
of the loss severity rates that we apply to our non-impaired loan portfolio. In
the event that estimated loss severity rates for our non-impaired loan
portfolio increased by 10%, the allowance for loan losses would increase by
approximately $1.1 million.
Intangible Assets
.
Intangible assets consist primarily of goodwill and other identifiable
intangible assets (primarily core deposit intangibles) that were recognized in
connection with various acquisitions. Goodwill represents the excess of the
cost of acquired businesses over the fair market value of their identifiable
net assets. We perform an impairment review on an annual basis or more
frequently if events or changes in circumstances indicate that the carrying
value may not be recoverable. Adverse changes in the economic environment,
declining operations, or other factors could result in a decline in the
estimated implied fair value of goodwill. If the estimated implied fair value
of goodwill is less than the carrying amount, a loss would be recognized to
reduce the carrying amount to the estimated implied fair value.
For purposes
of testing goodwill for impairment, we utilize a two step process. Step One
compares the estimated fair value of the reporting unit to its carrying amount.
If the carrying amount exceeds the estimated fair value, Step Two is performed
by comparing the fair value of the reporting units implied goodwill to the
carrying value of goodwill. If the carrying value of the reporting units
goodwill exceeds the estimated fair value, an impairment charge is recorded
equal to the excess. For Step One, we utilize both the income and market
approaches to value our reporting unit. The income approach consists of discounting
long-term projected future cash flows, which are derived from internal
forecasts and economic and industry expectations. The projected future cash
flows are discounted using a capital asset pricing model. The market approach
applies a market multiple, based on observed purchase transactions and/or an
observed price/tangible book value multiple for our peer group. For purposes of
performing Step Two, we perform a full purchase price allocation in the same
manner as if a business combination had occurred. As part of this process, we
estimate the fair value of all of the assets and liabilities of the reporting
unit.
For Step One,
there are judgments and estimates used in the income approach for determining
the estimated fair value of our reporting unit, including the discount rate and
terminal growth rates utilized, which can change based on changes in the
business climate, and the internal forecasts used to project cash flows, which
are subject to change over short periods of time. In addition, current economic
conditions and stress within the banking industry can impact the outcome of the
market valuation approach. For Step Two, a significant factor in the fair value
of our assets and overall goodwill impairment assessment is the loan discount
applied to our loan portfolio. A decrease of approximately 19% in the loan
discount would result in the carrying value of our goodwill being equal to the
implied goodwill value at December 31, 2011. Throughout 2011 we have evaluated
our goodwill for possible impairment using a consistent methodology and will
continue this assessment process due to the decline in the market value of our
stock to a level which is below book value. The aforementioned factors can
change from period to period and are presented to reflect the potential
variance in the fair value of our reporting unit and implied goodwill that
could occur should there be changes in these critical valuation factors.
63
Core deposit
assets represent the premium we paid for core deposits. Core deposit intangibles
are amortized on the straight-line method over various periods ranging from
5-10 years. Generally, core deposits refer to nonpublic, non-maturing deposits
including noninterest-bearing deposits, NOW, money market and savings. We make
certain estimates relating to the useful life of these assets and the rate of
run-off based on the nature of the specific assets and the client bases
acquired. If there is a reason to believe there has been a permanent loss in
value, management will assess these assets for impairment. Any changes in the
original estimates may materially affect our operating results.
Pension Assumptions
.
We have a defined benefit pension plan for the benefit of substantially all of
our associates. Our funding policy with respect to the pension plan is to
contribute amounts to the plan sufficient to meet minimum funding requirements
as set by law. Pension expense, reflected in the Consolidated Statements of
Operations in noninterest expense as Salaries and Associate Benefits, is
determined by an external actuarial valuation based on assumptions that are
evaluated annually as of December 31, the measurement date for the pension
obligation. The Consolidated Statements of Financial Condition reflect an
accrued pension benefit cost due to funding levels and unrecognized actuarial
amounts. The most significant assumptions used in calculating the pension
obligation are the weighted-average discount rate used to determine the present
value of the pension obligation, the weighted-average expected long-term rate
of return on plan assets, and the assumed rate of annual compensation
increases. These assumptions are re-evaluated annually with the external
actuaries, taking into consideration both current market conditions and
anticipated long-term market conditions.
The
weighted-average discount rate is determined by matching the anticipated
defined pension plan cash flows to a long-term corporate Aa-rated bond index
and solving for the underlying rate of return, which investing in such
securities would generate. This methodology is applied consistently from
year-to-year. The discount rate utilized in 2011 was 5.55%. The estimated
impact to 2011 pension expense of a 25 basis point increase or decrease in the
discount rate would have been a decrease and increase of approximately $596,000
and $691,000, respectively. We anticipate using a 5.00% discount rate in 2012.
The
weighted-average expected long-term rate of return on plan assets is determined
based on the current and anticipated future mix of assets in the plan. The
assets currently consist of equity securities, U.S. Government and Government
agency debt securities, and other securities (typically temporary liquid funds
awaiting investment). The weighted-average expected long-term rate of return on
plan assets utilized for 2011 was 8.0%. The estimated impact to 2011 pension
expense of a 25 basis point increase or decrease in the rate of return would
have been an approximate $205,000 decrease or increase, respectively. We
anticipate using a rate of return on plan assets for 2012 of 8.0%.
The assumed
rate of annual compensation increases of 4.25% in 2011 reflects expected trends
in salaries and the employee base. We anticipate using a compensation increase
of 4.00% for 2012 reflecting current market trends.
Detailed
information on the pension plan, the actuarially determined disclosures, and
the assumptions used are provided in Note 12 of the Notes to Consolidated
Financial Statements.
Recent Accounting Pronouncements
The Financial Accounting Standards Board, the
SEC, and other regulatory bodies have enacted new accounting pronouncements and
standards that either has impacted our results in prior years presented, or
will likely impact our results in 2012. Please refer to the Note 1 of the Notes
to our Consolidated Financial Statements.
|
|
I
TEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
See Financial
Condition - Market Risk and Interest Rate Sensitivity in Managements
Discussion and Analysis of Financial Condition and Results of Operations,
above, which is incorporated herein by reference.
64
|
|
I
tem 8.
|
Financial Statements and Supplementary Data
|
Table 14
QUARTERLY FINANCIAL DATA (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
(Dollars in Thousands, Except Per Share Data)
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
|
Summary of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
$
|
23,912
|
|
$
|
24,891
|
|
$
|
25,467
|
|
$
|
25,189
|
|
$
|
26,831
|
|
$
|
27,576
|
|
$
|
27,934
|
|
$
|
28,154
|
|
Interest Expense
|
|
|
1,515
|
|
|
1,791
|
|
|
2,028
|
|
|
2,203
|
|
|
2,473
|
|
|
2,792
|
|
|
3,565
|
|
|
4,132
|
|
Net Interest Income
|
|
|
22,397
|
|
|
23,100
|
|
|
23,439
|
|
|
22,986
|
|
|
24,358
|
|
|
24,784
|
|
|
24,369
|
|
|
24,022
|
|
Provision for Loan Losses
|
|
|
7,600
|
|
|
3,718
|
|
|
3,545
|
|
|
4,133
|
|
|
3,783
|
|
|
5,668
|
|
|
3,633
|
|
|
10,740
|
|
Net Interest Income After Provision for Loan Losses
|
|
|
14,797
|
|
|
19,382
|
|
|
19,894
|
|
|
18,853
|
|
|
20,575
|
|
|
19,449
|
|
|
20,736
|
|
|
13,282
|
|
Noninterest Income
|
|
|
13,873
|
|
|
14,193
|
|
|
14,448
|
|
|
16,334
|
|
|
14,735
|
|
|
13,449
|
|
|
14,674
|
|
|
13,967
|
|
Noninterest Expense
|
|
|
31,103
|
|
|
30,647
|
|
|
31,167
|
|
|
33,331
|
|
|
33,540
|
|
|
32,363
|
|
|
34,629
|
|
|
33,384
|
|
(Loss) Income Before Income Taxes
|
|
|
(2,433
|
)
|
|
2,928
|
|
|
3,175
|
|
|
1,856
|
|
|
1,770
|
|
|
202
|
|
|
781
|
|
|
(6,135
|
)
|
Income Tax (Benefit) Expense
|
|
|
(1,898
|
)
|
|
951
|
|
|
1,030
|
|
|
546
|
|
|
(148
|
)
|
|
(199
|
)
|
|
50
|
|
|
(2,672
|
)
|
Net (Loss) Income
|
|
$
|
(535
|
)
|
$
|
1,977
|
|
$
|
2,145
|
|
$
|
1,310
|
|
$
|
1,918
|
|
$
|
401
|
|
$
|
731
|
|
$
|
(3,463
|
)
|
Net Interest Income (FTE)
|
|
$
|
22,560
|
|
$
|
23,326
|
|
$
|
23,704
|
|
$
|
23,257
|
|
$
|
24,654
|
|
$
|
25,116
|
|
$
|
24,738
|
|
$
|
24,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Basic
|
|
$
|
(0.03
|
)
|
$
|
0.12
|
|
$
|
0.12
|
|
$
|
0.08
|
|
$
|
0.12
|
|
$
|
0.02
|
|
$
|
0.04
|
|
$
|
(0.20
|
)
|
Net Income (Loss) Diluted
|
|
|
(0.03
|
)
|
|
0.12
|
|
|
0.12
|
|
|
0.08
|
|
|
0.12
|
|
|
0.02
|
|
|
0.04
|
|
|
(0.20
|
)
|
Cash Dividends Declared
|
|
|
0.00
|
|
|
0.10
|
|
|
0.10
|
|
|
0.10
|
|
|
0.10
|
|
|
0.10
|
|
|
0.10
|
|
|
0.19
|
|
Diluted Book Value
|
|
|
14.68
|
|
|
15.20
|
|
|
15.20
|
|
|
15.13
|
|
|
15.15
|
|
|
15.25
|
|
|
15.32
|
|
|
15.34
|
|
Market Price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
11.11
|
|
|
11.18
|
|
|
13.12
|
|
|
13.80
|
|
|
14.19
|
|
|
14.24
|
|
|
18.25
|
|
|
14.61
|
|
Low
|
|
|
9.43
|
|
|
9.81
|
|
|
9.94
|
|
|
11.87
|
|
|
11.56
|
|
|
10.76
|
|
|
12.36
|
|
|
11.57
|
|
Close
|
|
|
9.55
|
|
|
10.38
|
|
|
10.26
|
|
|
12.68
|
|
|
12.60
|
|
|
12.14
|
|
|
12.38
|
|
|
14.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Average Balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, Net
|
|
$
|
1,646,715
|
|
$
|
1,667,720
|
|
$
|
1,704,348
|
|
$
|
1,730,330
|
|
$
|
1,782,916
|
|
$
|
1,807,483
|
|
$
|
1,841,379
|
|
$
|
1,886,367
|
|
Earning Assets
|
|
|
2,146,463
|
|
|
2,202,927
|
|
|
2,258,931
|
|
|
2,278,602
|
|
|
2,218,049
|
|
|
2,273,198
|
|
|
2,329,365
|
|
|
2,358,288
|
|
Total Assets
|
|
|
2,509,915
|
|
|
2,563,251
|
|
|
2,618,287
|
|
|
2,643,017
|
|
|
2,576,793
|
|
|
2,626,758
|
|
|
2,678,488
|
|
|
2,698,419
|
|
Deposits
|
|
|
2,032,975
|
|
|
2,061,913
|
|
|
2,107,301
|
|
|
2,125,379
|
|
|
2,115,867
|
|
|
2,172,165
|
|
|
2,234,178
|
|
|
2,248,760
|
|
Shareowners Equity
|
|
|
264,276
|
|
|
263,902
|
|
|
262,371
|
|
|
261,603
|
|
|
262,622
|
|
|
263,742
|
|
|
263,873
|
|
|
268,555
|
|
Common Equivalent Average Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
17,160
|
|
|
17,152
|
|
|
17,127
|
|
|
17,122
|
|
|
17,095
|
|
|
17,087
|
|
|
17,063
|
|
|
17,057
|
|
Diluted
|
|
|
17,161
|
|
|
17,167
|
|
|
17,139
|
|
|
17,130
|
|
|
17,096
|
|
|
17,088
|
|
|
17,074
|
|
|
17,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Average Assets
|
|
|
(0.08
|
)%
|
|
0.31
|
%
|
|
0.33
|
%
|
|
0.20
|
%
|
|
0.30
|
%
|
|
0.06
|
%
|
|
0.11
|
%
|
|
(0.52
|
)%
|
Return on Average Equity
|
|
|
(0.80
|
)
|
|
2.97
|
|
|
3.28
|
|
|
2.03
|
|
|
2.90
|
|
|
0.60
|
|
|
1.11
|
|
|
(5.23
|
)
|
Net Interest Margin (FTE)
|
|
|
4.17
|
|
|
4.20
|
|
|
4.21
|
|
|
4.14
|
|
|
4.41
|
|
|
4.38
|
|
|
4.26
|
|
|
4.21
|
|
Noninterest Income as % of Operating Revenue
|
|
|
38.34
|
|
|
38.14
|
|
|
38.13
|
|
|
41.54
|
|
|
37.69
|
|
|
35.17
|
|
|
37.58
|
|
|
36.77
|
|
Efficiency Ratio
|
|
|
85.08
|
|
|
81.40
|
|
|
81.41
|
|
|
83.30
|
|
|
83.75
|
|
|
82.08
|
|
|
86.06
|
|
|
85.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
31,035
|
|
|
29,658
|
|
|
31,080
|
|
|
33,873
|
|
|
35,436
|
|
|
37,720
|
|
|
38,442
|
|
|
41,199
|
|
Allowance for Loan Losses to Loans
|
|
|
1.91
|
%
|
|
1.79
|
%
|
|
1.84
|
%
|
|
1.98
|
%
|
|
2.01
|
%
|
|
2.10
|
%
|
|
2.11
|
%
|
|
2.23
|
%
|
Nonperforming Assets (NPAs)
|
|
|
137,623
|
|
|
114,592
|
|
|
122,092
|
|
|
129,318
|
|
|
123,637
|
|
|
125,376
|
|
|
122,614
|
|
|
122,826
|
|
NPAs to Total Assets
|
|
|
5.21
|
|
|
4.54
|
|
|
4.70
|
|
|
4.86
|
|
|
4.72
|
|
|
4.86
|
|
|
4.63
|
|
|
4.52
|
|
NPAS to Loans + ORE
|
|
|
8.14
|
|
|
6.67
|
|
|
6.98
|
|
|
7.31
|
|
|
6.81
|
|
|
6.77
|
|
|
6.56
|
|
|
6.47
|
|
Allowance to Non-Performing Loans
|
|
|
41.37
|
|
|
55.54
|
|
|
50.89
|
|
|
45.80
|
|
|
53.94
|
|
|
50.86
|
|
|
51.60
|
|
|
53.94
|
|
Net Charge-Offs to Average Loans
|
|
|
1.50
|
|
|
1.22
|
|
|
1.49
|
|
|
1.33
|
|
|
1.35
|
|
|
1.40
|
|
|
1.39
|
|
|
2.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I Capital
|
|
|
13.96
|
%
|
|
14.05
|
%
|
|
13.83
|
%
|
|
13.46
|
%
|
|
13.24
|
%
|
|
12.93
|
%
|
|
12.78
|
%
|
|
12.81
|
%
|
Total Capital
|
|
|
15.32
|
|
|
15.41
|
|
|
15.19
|
|
|
14.82
|
|
|
14.59
|
|
|
14.29
|
|
|
14.14
|
|
|
14.16
|
|
Tangible Capital
|
|
|
6.51
|
|
|
7.19
|
|
|
6.96
|
|
|
6.73
|
|
|
6.82
|
|
|
6.98
|
|
|
6.80
|
|
|
6.62
|
|
Leverage
|
|
|
10.26
|
|
|
10.20
|
|
|
9.95
|
|
|
9.74
|
|
|
10.10
|
|
|
9.75
|
|
|
9.58
|
|
|
9.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65
CAPITAL CITY BANK GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
66
R
eport of
Independent Registered Public Accounting Firm
The Board of
Directors and Shareowners of
Capital City Bank Group, Inc.
We have
audited the accompanying consolidated statements of financial condition of
Capital City Bank Group, Inc. as of December 31, 2011 and 2010, and the related
consolidated statements of operations, changes in shareowners equity, and cash
flows for each of the three years in the period ended December 31, 2011. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted
our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Capital City Bank
Group, Inc. at December 31, 2011 and 2010, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2011, in conformity with U.S. generally accepted accounting
principles.
We also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Capital City Bank Group, Inc.s internal
control over financial reporting as of December 31, 2011, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated March
15, 2012 expressed an unqualified opinion thereon.
|
/s/ Ernst & Young LLP
|
|
|
|
|
Birmingham, Alabama
|
|
March 15, 2012
|
|
67
C
APITAL CITY BANK
GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash and Due From Banks
|
|
$
|
54,953
|
|
$
|
35,410
|
|
Federal Funds Sold and Interest Bearing
Deposits
|
|
|
330,361
|
|
|
200,783
|
|
Total Cash and Cash Equivalents
|
|
|
385,314
|
|
|
236,193
|
|
|
|
|
|
|
|
|
|
Investment Securities, Available-for-Sale
|
|
|
307,149
|
|
|
309,731
|
|
|
|
|
|
|
|
|
|
Loans, Net of Unearned Income
|
|
|
1,628,683
|
|
|
1,758,671
|
|
Allowance for Loan Losses
|
|
|
(31,035
|
)
|
|
(35,436
|
)
|
Loans, Net
|
|
|
1,597,648
|
|
|
1,723,235
|
|
|
|
|
|
|
|
|
|
Premises and Equipment, Net
|
|
|
110,991
|
|
|
115,356
|
|
Goodwill
|
|
|
84,811
|
|
|
84,811
|
|
Other Intangible Assets
|
|
|
673
|
|
|
1,348
|
|
Other Real Estate Owned
|
|
|
62,600
|
|
|
57,937
|
|
Other Assets
|
|
|
92,126
|
|
|
93,442
|
|
Total Assets
|
|
$
|
2,641,312
|
|
$
|
2,622,053
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
Noninterest Bearing Deposits
|
|
$
|
618,317
|
|
$
|
546,257
|
|
Interest Bearing Deposits
|
|
|
1,554,202
|
|
|
1,557,719
|
|
Total Deposits
|
|
|
2,172,519
|
|
|
2,103,976
|
|
|
|
|
|
|
|
|
|
Short-Term Borrowings
|
|
|
43,372
|
|
|
92,928
|
|
Subordinated Notes Payable
|
|
|
62,887
|
|
|
62,887
|
|
Other Long-Term Borrowings
|
|
|
44,606
|
|
|
50,101
|
|
Other Liabilities
|
|
|
65,986
|
|
|
53,142
|
|
Total Liabilities
|
|
|
2,389,370
|
|
|
2,363,034
|
|
|
|
|
|
|
|
|
|
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; 17,160,274 and 17,100,081 shares issued and outstanding at
December 31, 2011 and December 31, 2010, respectively
|
|
|
172
|
|
|
171
|
|
Additional Paid-In Capital
|
|
|
37,838
|
|
|
36,920
|
|
Retained Earnings
|
|
|
237,461
|
|
|
237,679
|
|
Accumulated Other Comprehensive Loss, Net
of Tax
|
|
|
(23,529
|
)
|
|
(15,751
|
)
|
Total Shareowners Equity
|
|
|
251,942
|
|
|
259,019
|
|
Total Liabilities and Shareowners Equity
|
|
$
|
2,641,312
|
|
$
|
2,622,053
|
|
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
68
C
APITAL CITY BANK
GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(Dollars in Thousands, Except Per Share Data)
|
|
2011
|
|
2010
|
|
2009
|
|
INTEREST INCOME
|
|
|
|
|
|
|
|
|
|
|
Interest and Fees on Loans
|
|
$
|
94,944
|
|
$
|
105,710
|
|
$
|
117,324
|
|
Investment Securities:
|
|
|
|
|
|
|
|
|
|
|
Taxable Securities
|
|
|
3,321
|
|
|
2,681
|
|
|
2,698
|
|
Tax Exempt Securities
|
|
|
647
|
|
|
1,517
|
|
|
2,672
|
|
Funds Sold
|
|
|
547
|
|
|
587
|
|
|
82
|
|
Total Interest Income
|
|
|
99,459
|
|
|
110,495
|
|
|
122,776
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
3,947
|
|
|
8,645
|
|
|
10,585
|
|
Short-Term Borrowings
|
|
|
305
|
|
|
159
|
|
|
291
|
|
Subordinated Notes Payable
|
|
|
1,380
|
|
|
2,008
|
|
|
3,730
|
|
Other Long-Term Borrowings
|
|
|
1,905
|
|
|
2,150
|
|
|
2,236
|
|
Total Interest Expense
|
|
|
7,537
|
|
|
12,962
|
|
|
16,842
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME
|
|
|
91,922
|
|
|
97,533
|
|
|
105,934
|
|
Provision for Loan Losses
|
|
|
18,996
|
|
|
23,824
|
|
|
40,017
|
|
Net Interest Income After Provision for
Loan Losses
|
|
|
72,926
|
|
|
73,709
|
|
|
65,917
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST INCOME
|
|
|
|
|
|
|
|
|
|
|
Service Charges on Deposit Accounts
|
|
|
25,451
|
|
|
26,500
|
|
|
28,142
|
|
Data Processing Fees
|
|
|
3,230
|
|
|
3,610
|
|
|
3,628
|
|
Asset Management Fees
|
|
|
4,364
|
|
|
4,235
|
|
|
3,925
|
|
Retail Brokerage Fees
|
|
|
3,251
|
|
|
2,820
|
|
|
2,655
|
|
Securities Transactions
|
|
|
|
|
|
8
|
|
|
10
|
|
Mortgage Banking Fees
|
|
|
2,675
|
|
|
2,948
|
|
|
2,699
|
|
Bank Card Fees
|
|
|
10,141
|
|
|
9,200
|
|
|
10,306
|
|
Other
|
|
|
9,736
|
|
|
7,504
|
|
|
6,026
|
|
Total Noninterest Income
|
|
|
58,848
|
|
|
56,825
|
|
|
57,391
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
|
Salaries and Associate Benefits
|
|
|
63,642
|
|
|
62,755
|
|
|
65,067
|
|
Occupancy, Net
|
|
|
9,622
|
|
|
10,010
|
|
|
9,798
|
|
Furniture and Equipment
|
|
|
8,558
|
|
|
8,929
|
|
|
9,096
|
|
Intangible Amortization
|
|
|
675
|
|
|
2,682
|
|
|
4,042
|
|
Other Real Estate
|
|
|
12,677
|
|
|
14,922
|
|
|
7,577
|
|
Other
|
|
|
31,074
|
|
|
34,618
|
|
|
36,535
|
|
Total Noninterest Expense
|
|
|
126,248
|
|
|
133,916
|
|
|
132,115
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
5,526
|
|
|
(3,382
|
)
|
|
(8,807
|
)
|
Income Tax Expense (Benefit)
|
|
|
629
|
|
|
(2,969
|
)
|
|
(5,336
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
4,897
|
|
$
|
(413
|
)
|
$
|
(3,471
|
)
|
BASIC NET INCOME (LOSS) PER SHARE
|
|
$
|
0.29
|
|
$
|
(0.02
|
)
|
$
|
(0.20
|
)
|
DILUTED NET INCOME (LOSS) PER SHARE
|
|
$
|
0.29
|
|
$
|
(0.02
|
)
|
$
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Average Basic Common Shares Outstanding
|
|
|
17,140
|
|
|
17,076
|
|
|
17,044
|
|
Average Diluted Common Shares Outstanding
|
|
|
17,140
|
|
|
17,077
|
|
|
17,045
|
|
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
69
C
APITAL CITY BANK
GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
Thousands, Except Per Share Data)
|
|
Shares
Outstanding
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
(Loss) Income,
Net of Taxes
|
|
Total
|
|
Balance, January 1, 2009
|
|
|
17,126,997
|
|
$
|
171
|
|
$
|
36,783
|
|
$
|
262,890
|
|
$
|
(21,014
|
)
|
$
|
278,830
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
(3,471
|
)
|
|
|
|
|
(3,471
|
)
|
Change in Unrealized Gain on Available-for-Sale Securities
(net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(888
|
)
|
|
(888
|
)
|
Change in Funded Status of Defined Pension Plan and SERP Plan
(net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,072
|
|
|
7,072
|
|
Total Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,713
|
|
Cash Dividends ($.7600 per share)
|
|
|
|
|
|
|
|
|
|
|
|
(12,959
|
)
|
|
|
|
|
(12,959
|
)
|
Stock Performance Plan Compensation
|
|
|
|
|
|
|
|
|
(176
|
)
|
|
|
|
|
|
|
|
(176
|
)
|
Issuance of Common Stock
|
|
|
55,298
|
|
|
|
|
|
1,052
|
|
|
|
|
|
|
|
|
1,052
|
|
Repurchase of Common Stock
|
|
|
(145,888
|
)
|
|
(1
|
)
|
|
(1,560
|
)
|
|
|
|
|
|
|
|
(1,561
|
)
|
Balance, December 31, 2009
|
|
|
17,036,407
|
|
|
170
|
|
|
36,099
|
|
|
246,460
|
|
|
(14,830
|
)
|
|
267,899
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
(413
|
)
|
|
|
|
|
(413
|
)
|
Change in Unrealized Gain on Available-for-Sale Securities
(net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
79
|
|
Change in Funded Status of Defined Pension Plan and SERP Plan
(net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,000
|
)
|
|
(1,000
|
)
|
Total Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,334
|
)
|
Cash Dividends ($.4900 per share)
|
|
|
|
|
|
|
|
|
|
|
|
(8,368
|
)
|
|
|
|
|
(8,368
|
)
|
Issuance of Common Stock
|
|
|
63,674
|
|
|
1
|
|
|
821
|
|
|
|
|
|
|
|
|
822
|
|
Balance, December 31, 2010
|
|
|
17,100,081
|
|
|
171
|
|
|
36,920
|
|
|
237,679
|
|
|
(15,751
|
)
|
|
259,019
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
4,897
|
|
|
|
|
|
4,897
|
|
Change in Unrealized Gain On Available-for-Sale Securities
(net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
397
|
|
|
397
|
|
Change in Funded Status of Defined Pension Plan and SERP Plan
(net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,175
|
)
|
|
(8,175
|
)
|
Total Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,881
|
)
|
Cash Dividends ($.3000 per share)
|
|
|
|
|
|
|
|
|
|
|
|
(5,115
|
)
|
|
|
|
|
(5,115
|
)
|
Issuance of Common Stock
|
|
|
60,193
|
|
|
1
|
|
|
918
|
|
|
|
|
|
|
|
|
919
|
|
Balance, December 31, 2011
|
|
|
17,160,274
|
|
$
|
172
|
|
$
|
37,838
|
|
$
|
237,461
|
|
$
|
(23,529
|
)
|
$
|
251,942
|
|
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
70
C
APITAL CITY BANK
GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
4,897
|
|
$
|
(413
|
)
|
$
|
(3,471
|
)
|
Adjustment to Reconcile Net Income (Loss)
to Cash Provided by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
|
|
|
18,996
|
|
|
23,824
|
|
|
40,017
|
|
Depreciation
|
|
|
6,770
|
|
|
7,050
|
|
|
6,680
|
|
Net Securities Amortization
|
|
|
3,808
|
|
|
3,384
|
|
|
2,364
|
|
Amortization of Intangible Assets
|
|
|
675
|
|
|
2,682
|
|
|
4,042
|
|
Gain on Securities Transactions
|
|
|
|
|
|
(8
|
)
|
|
(10
|
)
|
Loss on Impaired Security
|
|
|
|
|
|
100
|
|
|
300
|
|
Origination of Loans Held-for-Sale
|
|
|
(128,283
|
)
|
|
(143,479
|
)
|
|
(158,193
|
)
|
Proceeds From Sales of Loans Held-for-Sale
|
|
|
123,528
|
|
|
148,288
|
|
|
156,865
|
|
Net Gain From Sales of Loans Held-for Sale
|
|
|
(2,675
|
)
|
|
(2,948
|
)
|
|
(2,699
|
)
|
Net (Increase) Decrease in Deferred Income
Taxes
|
|
|
(2,919
|
)
|
|
1,898
|
|
|
2,911
|
|
Net Decrease in Other Assets
|
|
|
28,611
|
|
|
16,457
|
|
|
5,929
|
|
Net Increase (Decrease) in Other
Liabilities
|
|
|
12,846
|
|
|
19,059
|
|
|
(4,176
|
)
|
Net Cash Provided by Operating Activities
|
|
|
66,254
|
|
|
75,894
|
|
|
50,559
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Securities Available-for-Sale:
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
(81,984
|
)
|
|
(224,245
|
)
|
|
(66,794
|
)
|
Sales
|
|
|
|
|
|
505
|
|
|
2,806
|
|
Payments, Maturities, and Calls
|
|
|
81,405
|
|
|
86,935
|
|
|
75,295
|
|
Net Decrease (Increase) in Loans
|
|
|
76,582
|
|
|
73,775
|
|
|
(31,135
|
)
|
Purchase of Premises & Equipment
|
|
|
(2,404
|
)
|
|
(6,975
|
)
|
|
(15,688
|
)
|
Proceeds From Sales of Premises &
Equipment
|
|
|
|
|
|
7
|
|
|
2
|
|
Net Cash Provided By (Used In) Investing
Activities
|
|
|
73,599
|
|
|
(69,998
|
)
|
|
(35,514
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Deposits
|
|
|
68,543
|
|
|
(154,258
|
)
|
|
266,061
|
|
Net (Decrease) Increase in Short-Term
Borrowings
|
|
|
(49,557
|
)
|
|
57,088
|
|
|
(26,486
|
)
|
Increase in Other Long-Term Borrowings
|
|
|
789
|
|
|
2,478
|
|
|
2,029
|
|
Repayment of Other Long-Term Borrowings
|
|
|
(6,284
|
)
|
|
(1,758
|
)
|
|
(3,837
|
)
|
Dividends Paid
|
|
|
(5,142
|
)
|
|
(8,368
|
)
|
|
(12,959
|
)
|
Repurchase of Common Stock
|
|
|
|
|
|
|
|
|
(1,561
|
)
|
Issuance of Common Stock
|
|
|
919
|
|
|
822
|
|
|
1,052
|
|
Net Cash Provided By (Used In) Financing
Activities
|
|
|
9,268
|
|
|
(103,996
|
)
|
|
224,299
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
149,121
|
|
|
(98,100
|
)
|
|
239,344
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at Beginning of
Year
|
|
|
236,193
|
|
|
334,293
|
|
|
94,949
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
385,314
|
|
$
|
236,193
|
|
$
|
334,293
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
|
Interest Paid on Deposits
|
|
$
|
4,477
|
|
$
|
9,659
|
|
$
|
10,586
|
|
Interest Paid on Debt
|
|
|
3,698
|
|
|
4,323
|
|
|
6,273
|
|
Taxes Paid
|
|
|
8,646
|
|
|
605
|
|
|
7,218
|
|
Loans Transferred to Other Real Estate
|
|
|
37,438
|
|
|
49,247
|
|
|
43,997
|
|
Issuance of Common Stock as Non-Cash
Compensation
|
|
|
|
|
|
|
|
|
155
|
|
Transfer of Current Portion of Long-Term
Borrowings
|
|
$
|
|
|
$
|
10,000
|
|
$
|
637
|
|
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
71
N
otes to Consolidated Financial Statements
Note 1
SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The
consolidated financial statements include the accounts of Capital City Bank
Group, Inc. (CCBG), and its wholly-owned subsidiary, Capital City Bank (CCB
or the Bank and together with CCBG, the Company). All material
inter-company transactions and accounts have been eliminated.
The Company,
which operates a single reportable business segment that is comprised of
commercial banking within the states of Florida, Georgia, and Alabama, follows
accounting principles generally accepted in the United States of America and
reporting practices applicable to the banking industry. The principles which
materially affect the financial position, results of operations and cash flows
are summarized below.
The Company
determines whether it has a controlling financial interest in an entity by
first evaluating whether the entity is a voting interest entity or a variable
interest entity under accounting principles generally accepted in the United
States of America. Voting interest entities are entities in which the total
equity investment at risk is sufficient to enable the entity to finance itself
independently and provide the equity holders with the obligation to absorb
losses, the right to receive residual returns and the right to make decisions
about the entitys activities. The Company consolidates voting interest
entities in which it has all, or at least a majority of, the voting interest.
As defined in applicable accounting standards, variable interest entities
(VIEs) are entities that lack one or more of the characteristics of a voting
interest entity. A controlling financial interest in an entity is present when
an enterprise has a variable interest, or a combination of variable interests,
that will absorb a majority of the entitys expected losses, receive a majority
of the entitys expected residual returns, or both. The enterprise with a
controlling financial interest, known as the primary beneficiary, consolidates
the VIE. CCBGs wholly-owned subsidiaries, CCBG Capital Trust I (established
November 1, 2004) and CCBG Capital Trust II (established May 24, 2005) are VIEs
for which the Company is not the primary beneficiary. Accordingly, the accounts
of these entities are not included in the Companys consolidated financial statements.
Certain items
in prior financial statements have been reclassified to conform to the current
presentation. The Company has evaluated subsequent events for potential
recognition and/or disclosure through the date the consolidated financial statements
included in this Annual Report on Form 10-K were issued.
Use of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could vary from these estimates. Material
estimates that are particularly susceptible to significant changes in the
near-term relate to the determination of the allowance for loan losses, pension
expense, income taxes, loss contingencies, and valuation of goodwill and other
intangibles and their respective analysis of impairment.
Cash and Cash Equivalents
Cash and cash
equivalents include cash and due from banks, interest-bearing deposits in other
banks, and federal funds sold. Generally, federal funds are purchased and sold
for one-day periods and all other cash equivalents have a maturity of 90 days
or less. The Company is required to maintain average reserve balances with the
Federal Reserve Bank based upon a percentage of deposits. The average amounts of
these reserve balances for the years ended December 31, 2011 and 2010 were
$16.1 million and $16.3 million, respectively.
Investment Securities
Investment
securities available-for-sale are carried at fair value and represent
securities that are available to meet liquidity and/or other needs of the
Company. Gains and losses are recognized and reported separately in the
Consolidated Statements of Operations upon realization or when impairment of
values is deemed to be other than temporary. In estimating other-than-temporary
impairment losses, management considers, (i) the length of time and the extent
to which the fair value has been less than cost, (ii) the financial condition
and near-term prospects of the issuer, and (iii) the intent and ability of the Company
to retain its investment in the issuer for a period of time sufficient to allow
for anticipated recovery in fair value. Gains or losses are recognized using
the specific identification method. Unrealized holding gains and losses for
securities available-for-sale are excluded from the Consolidated Statements of
Operations and reported net of taxes in the accumulated other comprehensive
income component of shareowners equity until realized. Accretion and
amortization are recognized on the effective yield method over the life of the
securities.
72
Loans
Loans are
stated at the principal amount outstanding, net of unearned income. Interest
income is accrued on the effective yield method based on outstanding balances.
Fees charged to originate loans and direct loan origination costs are deferred
and amortized over the life of the loan as a yield adjustment. The Company
defines loans as past due when one full payment is past due or a contractual
maturity is over 30 days late. The accrual of interest is generally suspended
on loans more than 90 days past due with respect to principal or interest. When
a loan is placed on nonaccrual status, all previously accrued and uncollected
interest is reversed against current income. Interest income on nonaccrual loans
is recognized when the ultimate collectability is no longer considered
doubtful. Loans are returned to accrual status when the principal and interest
amounts contractually due are brought current or when future payments are
reasonably assured. Loans are charged-off (if unsecured) or written-down (if
secured) when losses are probable and reasonably quantifiable.
Loans Held For Sale
Certain
residential mortgage loans are originated for sale in the secondary mortgage
loan market. Additionally, certain other loans are periodically identified to
be sold. The Company has the ability and intent to sell these loans and they
are classified as loans held for sale and carried at the lower of cost or
estimated fair value. At December 31, 2011 and December 31, 2010, the Company
had $13.8 million and $6.3 million, respectively, in loans classified as held
for sale which were committed to be purchased by third party investors. Fair
value is determined on the basis of rates quoted in the respective secondary
market for the type of loan held for sale. Loans are generally sold with
servicing released at a premium or discount from the carrying amount of the
loans. Such premium or discount is recognized as mortgage banking revenue at
the date of sale. Fixed commitments are generally used at the time loans are
originated or identified for sale to mitigate interest rate risk. The fair
value of fixed commitments to originate and sell loans held for sale is not
material.
Allowance for Loan Losses
The allowance
for loan losses is a reserve established through a provision for loan losses
charged to expense, which represents managements best estimate of probable
losses within the existing portfolio of loans. The allowance is that amount
considered adequate to absorb losses inherent in the loan portfolio based on
managements evaluation of credit risk as of the balance sheet date.
The allowance
for loan losses includes allowance allocations calculated in accordance with
FASB ASC Topic 310 Receivables (formerly Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan,
as amended by SFAS 118), and allowance allocations calculated in accordance
with ASC Topic 450 (formerly SFAS 5), Accounting for Contingencies. The level
of the allowance reflects managements continuing evaluation of specific credit
risks, loan loss experience, current loan portfolio quality, present economic
conditions and unidentified losses inherent in the current loan portfolio, as
well as trends in the foregoing. This evaluation is inherently subjective, as
it requires estimates that are susceptible to significant revision as more
information becomes available.
The Companys
allowance for loan losses consists of three components: (i) specific valuation
allowances established for probable losses on specific loans deemed impaired;
(ii) valuation allowances calculated for specific homogenous loan pools based
on, but not limited to, historical loan loss experience, current economic
conditions, levels of past due loans, and levels of problem loans; (iii) an
unallocated allowance that reflects managements determination of estimation
risk.
Long-Lived Assets
Premises and
equipment is stated at cost less accumulated depreciation, computed on the
straight-line method over the estimated useful lives for each type of asset
with premises being depreciated over a range of 10 to 40 years, and equipment
being depreciated over a range of 3 to 10 years. Additions, renovations and
leasehold improvements to premises are capitalized and depreciated over the
lesser of the useful life or the remaining lease term. Repairs and maintenance
are charged to noninterest expense as incurred.
Intangible
assets, other than goodwill, consist of core deposit intangible assets and
client relationship assets that were recognized in connection with various
acquisitions. Core deposit intangible assets are amortized on the straight-line
method over various periods, with the majority being amortized over an average
of 5 to 10 years. Other identifiable intangibles are amortized on the
straight-line method over their estimated useful lives.
Long-lived
assets are evaluated for impairment if circumstances suggest that their
carrying value may not be recoverable, by comparing the carrying value to estimated
undiscounted cash flows. If the asset is deemed impaired, an impairment charge
is recorded equal to the carrying value less the fair value.
73
Goodwill
Goodwill
represents the excess of the cost of businesses acquired over the fair value of
the net assets acquired. In accordance with FASB ASC Topic 350, the Company
determined it has one goodwill reporting unit. Goodwill is tested for
impairment at least annually or on an interim basis if an event occurs or
circumstances change that would more likely than not reduce the fair value of
the reporting unit below its carrying value. See Note 5 Intangible Assets for
additional information.
Foreclosed Assets
Assets
acquired through or instead of loan foreclosure are held for sale and are
initially recorded at the lower of cost or fair value less estimated selling
costs when acquired. A subsequent decline in the fair value of the asset is
reflected as noninterest expense. Costs after acquisition are generally
expensed. The valuation of foreclosed assets is subjective in nature and may be
adjusted in the future because of changes in economic conditions. Foreclosed
assets are included in other assets in the accompanying consolidated balance
sheets and totaled $62.6 million and $57.9 million at December 31, 2011 and
2010.
Loss Contingencies
Loss
contingencies, including claims and legal actions arising in the ordinary
course of business are recorded as liabilities when the likelihood of loss is
probable and an amount or range of loss can be reasonably estimated.
Income Taxes
Income tax
expense is the total of the current year income tax due or refundable and the
change in deferred tax assets and liabilities (excluding deferred tax assets
and liabilities related to business combinations or components of other
comprehensive income). Deferred tax assets and liabilities are the expected
future tax amounts for the temporary differences between carrying amounts and
tax bases of assets and liabilities, computed using enacted tax rates. A
valuation allowance, if needed, reduces deferred tax assets to the expected
amount most likely to be realized. Realization of deferred tax assets is
dependent upon the generation of a sufficient level of future taxable income
and recoverable taxes paid in prior years.
The Company
files a consolidated federal income tax return and each subsidiary files a
separate state income tax return.
Earnings Per Common Share
Basic earnings
per common share is based on net income divided by the weighted-average number
of common shares outstanding during the period excluding non-vested stock.
Diluted earnings per common share include the dilutive effect of stock options
and non-vested stock awards granted using the treasury stock method. A
reconciliation of the weighted-average shares used in calculating basic
earnings per common share and the weighted average common shares used in
calculating diluted earnings per common share for the reported periods is
provided in Note 13 Earnings Per Share.
Comprehensive Income
Comprehensive
income includes all changes in shareowners equity during a period, except
those resulting from transactions with shareowners. Besides net income, other
components of the Companys comprehensive income include the after tax effect
of changes in the net unrealized gain/loss on securities available for sale and
changes in the funded status of defined benefit and supplemental executive
retirement plans. Comprehensive income is reported in the accompanying
Consolidated Statements of Changes in Shareowners Equity.
Stock Based Compensation
Compensation
cost is recognized for share based awards issued to employees, based on the
fair value of these awards at the date of grant. The market price of the
Companys common stock at the date of the grant is used for restricted stock
awards. For stock option awards, a Black-Scholes model is utilized to estimate
the value of the options. Compensation cost is recognized over the required
service period, generally defined as the vesting period.
74
NEW AUTHORITATIVE ACCOUNTING GUIDANCE
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 Companys financial statements.
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 entitys 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 Companys 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 employers 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 provisions of the new authoritative accounting guidance under ASC
Topic 715 became effective for the Companys financial statements for the
year-ended December 31, 2009. See Note 12 Employee Benefit Plans.
FASB 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 Companys accounting for business combinations closing on or after
January 1, 2009. The provisions of the new authoritative accounting guidance
under ASC Topic 305 became effective during the first quarter of 2009. The new
guidance did not significantly impact the Companys financial statements.
FASB ASC Topic 810, Consolidation.
New accounting guidance amended prior guidance to establish accounting and
reporting standards for the non-controlling interest in a subsidiary and for
the deconsolidation of a subsidiary. This guidance became effective for the
Company on January 1, 2009 and did not have a significant impact on the
Companys financial statements.
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 entitys 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 Companys financial statements.
75
FASB ASC Topic 820, Fair Value Measurements
and Disclosures.
ASC Topic 820 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
The provisions of ASC Topic 820 became effective for the Company on January 1,
2008 for financial assets and financial liabilities and on January 1, 2009 for
non-financial assets and non-financial liabilities. Additional new accounting
guidance under ASC Topic 820, which became effective during the first quarter
of 2009, expanded certain disclosure requirements and affirmed 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. ASU 2009-5, Fair Value Measurements and Disclosures (Topic
820)Measuring Liabilities at Fair Value, which became effective during the
fourth quarter of 2009, provided 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. See Note 19Fair Value Measurements.
FASB ASC Topic 855, Subsequent Events.
New accounting guidance established 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. This guidance became
effective for the Companys financial statements for periods ending after June
15, 2009 and did not have a significant impact on the Companys financial
statements.
ASU No. 2009-16, Transfers and Servicing
(Topic 860) - Accounting for Transfers of Financial Assets.
The new authoritative accounting guidance 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. ASU 2009-16 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 ASU 2009-16 became effective January 1, 2010 and did not have a
significant impact on the Companys financial statements.
ASU No. 2009-17, Consolidations (Topic 810)
- Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities.
ASU 2009-17 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 entitys purpose and design and a
companys ability to direct the activities of the entity that most
significantly impact the entitys economic performance. ASU 2009-17 requires
additional disclosures about the reporting entitys involvement with
variable-interest entities and any significant changes in risk exposure due to
that involvement as well as its effect on the entitys financial statements.
ASU 2009-17 became effective January 1, 2010 and did not have a significant
impact on the Companys financial statements.
ASU No. 2010-06, Fair Value Measurements and
Disclosures (Topic 820) - Improving Disclosures About Fair Value Measurements.
ASU 2010-06 requires expanded disclosures related to fair value measurements
including (i) the amounts of significant transfers of assets or liabilities
between Levels 1 and 2 of the fair value hierarchy and the reasons for the
transfers, (ii) the reasons for transfers of assets or liabilities in or out of
Level 3 of the fair value hierarchy, with significant transfers disclosed
separately, (iii) the policy for determining when transfers between levels of
the fair value hierarchy are recognized and (iv) for recurring fair value
measurements of assets and liabilities in Level 3 of the fair value hierarchy,
a gross presentation of information about purchases, sales, issuances and
settlements. ASU 2010-06 further clarifies that (i) fair value measurement
disclosures should be provided for each class of assets and liabilities (rather
than major category), which would generally be a subset of assets or
liabilities within a line item in the statement of financial position and (ii)
companys should provide disclosures about the valuation techniques and inputs
used to measure fair value for both recurring and nonrecurring fair value
measurements for each class of assets and liabilities included in Levels 2 and
3 of the fair value hierarchy. The disclosures related to the gross
presentation of purchases, sales, issuances and settlements of assets and
liabilities included in Level 3 of the fair value hierarchy will be required
for the Company beginning January 1, 2011 and is not expected to have a
significant impact on the Companys financial statements. The remaining disclosure
requirements and clarifications made by ASU 2010-06 became effective for the
Company on January 1, 2010 and did not have a significant impact on the
Companys financial statements.
ASU No. 2010-11, Derivatives and Hedging
(Topic 815)Scope Exception Related to Embedded Credit Derivatives.
ASU 2010-11 clarifies that the only form of an embedded credit derivative that
is exempt from embedded derivative bifurcation requirements are those that
relate to the subordination of one financial instrument to another. As a
result, entities that have contracts containing an embedded credit derivative
feature in a form other than such subordination may need to separately account
for the embedded credit derivative feature. The provisions of ASU 2010-11
became effective for the Company on July 1, 2010 and did not have a significant
impact on the Companys financial statements.
ASU No. 2010-20, Receivables (Topic
310)Disclosures about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses.
ASU 2010-20 requires
entities to provide disclosures designed to facilitate financial statement
users evaluation of (i) the nature of credit risk inherent in the entitys
portfolio of financing receivables, (ii) how that risk is analyzed and assessed
in arriving at the allowance for credit losses and (iii) the changes and
reasons for those changes in the allowance for credit losses. Disclosures must
be disaggregated by portfolio segment, the level at which an entity develops
and documents a systematic method for determining its allowance for credit
losses, and class of financing receivable, which is generally a disaggregation
of portfolio segment.
76
The required disclosures include, among other things, a
roll-forward of the allowance for credit losses as well as information about
modified, impaired, non-accrual and past due loans and credit quality
indicators. ASU 2010-20 became effective for the Companys financial statements
as of December 31, 2010, as it relates to disclosures required as of the end of
a reporting period. Disclosures that relate to activity during a reporting
period will be required for the Companys financial statements that include
periods beginning on or after January 1, 2011. ASU 2011-01, Receivables (Topic
310)Deferral of the Effective Date of Disclosures about Troubled Debt
Restructurings in Update No. 2010-20, temporarily deferred the effective date
for disclosures related to troubled debt restructurings to coincide with the
effective date of a proposed accounting standards update related to troubled
debt restructurings, which is currently expected to be effective for periods
ending after June 15, 2011. See Note 3Loans.
ASU No. 2010-28, IntangiblesGoodwill and
Other (Topic 350)When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts.
ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units
with zero or negative carrying amounts. For those reporting units, an entity is
required to perform Step 2 of the goodwill impairment test if it is more likely
than not that a goodwill impairment exists. In determining whether it is more
likely than not that a goodwill impairment exists, an entity should consider
whether there are any adverse qualitative factors indicating that an impairment
may exist such as if an event occurs or circumstances change that would more
likely than not reduce the fair value of a reporting unit below its carrying
amount. ASU 2010-28 became effective for the Company on January 1, 2011 and did
not have a significant impact on the Companys financial statements.
ASU No. 2010-29, Business Combinations
(Topic 805)Disclosure of Supplementary Pro Forma Information for Business
Combinations.
ASU 2010-29 provides clarification regarding
the acquisition date that should be used for reporting the pro forma financial
information disclosures required by Topic 805 when comparative financial
statements are presented. ASU 2010-29 also requires entities to provide a
description of the nature and amount of material, nonrecurring pro forma
adjustments that are directly attributable to the business combination. ASU
2010-29 is effective for the Company prospectively for business combinations
occurring after December 31, 2010.
ASU No. 2011-02, Receivables (Topic 310) - A
Creditors Determination of Whether a Restructuring Is a Troubled Debt
Restructuring.
ASU 2011-02 clarifies which loan
modifications constitute troubled debt restructurings and is intended to assist
creditors in determining whether a modification of the terms of a receivable
meets the criteria to be considered a troubled debt restructuring, both for
purposes of recording an impairment loss and for disclosure of troubled debt
restructurings. In evaluating whether a restructuring constitutes a troubled
debt restructuring, a creditor must separately conclude, under the guidance
clarified by ASU 2011-02, that both of the following exist: (a) the
restructuring constitutes a concession; and (b) the debtor is experiencing
financial difficulties. ASU 2011-02 became effective for the Company on July 1,
2011, and applies retrospectively to restructurings occurring on or after
January 1, 2011. See Note 3Loans.
ASU No. 2011-03, Transfers and Servicing
(Topic 860) - Reconsideration of Effective Control for Repurchase Agreements.
ASU 2011-03 is intended to improve financial reporting of repurchase agreements
and other agreements that both entitle and obligate a transferor to repurchase
or redeem financial assets before their maturity. ASU 2011-03 removes from the
assessment of effective control (i) the criterion requiring the transferor to
have the ability to repurchase or redeem the financial assets on substantially
the agreed terms, even in the event of default by the transferee, and (ii) the
collateral maintenance guidance related to that criterion. ASU 2011-03 will be
effective for the Company on January 1, 2012 and is not expected to have a
significant impact on the Companys financial statements.
ASU 2011-04, Fair Value Measurement (Topic
820) - Amendments to Achieve Common Fair Value Measurements and Disclosure
Requirements in U.S. GAAP and IFRSs.
ASU 2011-04
amends Topic 820, Fair Value Measurements and Disclosures, to converge the
fair value measurement guidance in U.S. generally accepted accounting
principles and International Financial Reporting Standards. ASU 2011-04
clarifies the application of existing fair value measurement requirements,
changes certain principles in Topic 820 and requires additional fair value
disclosures. ASU 2011-04 is effective for annual periods beginning after
December 15, 2011, and is not expected to have a significant impact on the
Companys financial statements.
ASU 2011-05, Comprehensive Income (Topic
220) - Presentation of Comprehensive Income.
ASU
2011-05 amends Topic 220, Comprehensive Income, to require that all non-owner
changes in stockholders equity be presented in either a single continuous
statement of comprehensive income or in two separate but consecutive
statements. Additionally, ASU 2011-05 requires entities to present, on the face
of the financial statements, reclassification adjustments for items that are
reclassified from other comprehensive income to net income in the statement or
statements where the components of net income and the components of other
comprehensive income are presented. The option to present components of other
comprehensive income as part of the statement of changes in stockholders
equity was eliminated. ASU 2011-05 is effective for annual periods beginning after
December 15, 2011; however, certain provisions related to the presentation of
reclassification adjustments have been deferred by ASU 2011-12 Comprehensive
Income (Topic 220) - Deferral of the Effective Date for Amendments to the
Presentation of Reclassifications of Items Out of Accumulated Other
Comprehensive Income in Accounting Standards Update No. 2011-05, as further
discussed below. ASU 2011-05 is not expected to have a significant impact on
the Companys financial statements.
77
ASU 2011-08, Intangibles - Goodwill and
Other (Topic 350) - Testing Goodwill for Impairment.
ASU 2011-08 amends Topic 350, Intangibles Goodwill and Other, to give
entities the option to first assess qualitative factors to determine whether
the existence of events or circumstances leads to a determination that it is
more likely than not that the fair value of a reporting unit is less than its
carrying amount. If, after assessing the totality of events or circumstances,
an entity determines it is not more likely than not that the fair value of a
reporting unit is less than its carrying amount, then performing the two-step
impairment test is unnecessary. However, if an entity concludes otherwise, then
it is required to perform the first step of the two-step impairment test by
calculating the fair value of the reporting unit and comparing the fair value
with the carrying amount of the reporting unit. ASU 2011-08 is effective for
annual and interim impairment tests beginning after December 15, 2011, and is
not expected to have a significant impact on the Companys financial
statements.
ASU 2011-11, Balance Sheet (Topic 210) -
Disclosures about Offsetting Assets and Liabilities.
ASU 2011-11 amends Topic 210, Balance Sheet, to require an entity to disclose
both gross and net information about financial instruments, such as sales and
repurchase agreements and reverse sale and repurchase agreements and securities
borrowing/lending arrangements, and derivative instruments that are eligible
for offset in the statement of financial position and/or subject to a master
netting arrangement or similar agreement. ASU 2011-11 is effective for annual
and interim periods beginning on January 1, 2013, and is not expected to have a
significant impact on the Companys financial statements.
ASU 2011-12
Comprehensive Income (Topic 220) - Deferral of the Effective Date for
Amendments to the Presentation of Reclassifications of Items Out of Accumulated
Other Comprehensive Income in Accounting Standards Update No. 2011-05.
ASU
2011-12 defers changes in ASU No. 2011-05 that relate to the presentation of
reclassification adjustments to allow the FASB time to re-deliberate whether to
require presentation of such adjustments on the face of the financial
statements to show the effects of reclassifications out of accumulated other
comprehensive income on the components of net income and other comprehensive
income. ASU 2011-12 allows entities to continue to report reclassifications out
of accumulated other comprehensive income consistent with the presentation
requirements in effect before ASU No. 2011-05. All other requirements in ASU
No. 2011-05 are not affected by ASU No. 2011-12. ASU 2011-12 is effective for
annual and interim periods beginning after December 15, 2011 and is not
expected to have a significant impact on the Companys financial statements.
78
Note 2
INVESTMENT SECURITIES
Investment Portfolio Composition
.
The amortized cost and related market value of investment securities
available-for-sale at December 31, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
(Dollars in Thousands)
|
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Market
Value
|
|
U.S. Government Treasury
|
|
$
|
168,001
|
|
$
|
1,463
|
|
$
|
|
|
$
|
169,464
|
|
U.S. Government Agency
|
|
|
14,758
|
|
|
27
|
|
|
48
|
|
|
14,737
|
|
States and Political Subdivisions
|
|
|
58,946
|
|
|
186
|
|
|
38
|
|
|
59,094
|
|
Mortgage-Backed Securities
|
|
|
51,775
|
|
|
809
|
|
|
87
|
|
|
52,497
|
|
Other Securities(1)
|
|
|
11,957
|
|
|
|
|
|
600
|
|
|
11,357
|
|
Total Investment Securities
|
|
$
|
305,437
|
|
$
|
2,485
|
|
$
|
773
|
|
$
|
307,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
(Dollars in Thousands)
|
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Market
Value
|
|
U.S. Government Treasury
|
|
$
|
160,913
|
|
$
|
1,371
|
|
$
|
134
|
|
$
|
162,150
|
|
U.S. Government Agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and Political Subdivisions
|
|
|
78,990
|
|
|
319
|
|
|
9
|
|
|
79,300
|
|
Mortgage-Backed Securities
|
|
|
56,099
|
|
|
678
|
|
|
560
|
|
|
56,217
|
|
Other Securities(1)
|
|
|
12,664
|
|
|
|
|
|
600
|
|
|
12,064
|
|
Total Investment Securities
|
|
$
|
308,666
|
|
$
|
2,368
|
|
$
|
1,303
|
|
$
|
309,731
|
|
|
|
(1)
|
Includes Federal Home Loan Bank (FHLB) and Federal Reserve Bank
stock recorded at cost of $6.5 million and $4.8 million, respectively, at
December 31, 2011 and $7.2 million and $4.8 million, respectively, at
December 31, 2010. No ready market exists for these stocks, and they have no
quoted market value. However, redemption of these stocks has historically
been at par value.
|
Securities
with an amortized cost of $102.1 million and $131.6 million at December 31,
2011 and 2010, respectively, were pledged to secure public deposits and for
other purposes.
The Companys
subsidiary, CCB, as a member of the 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 $6.5 million
which is included in other securities is pledged to secure FHLB advances.
Investment Sales
.
The total proceeds from the sale or call of investment securities and the gross
realized gains and losses from the sale or call of such securities for each of
the last three years are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Year
|
|
Total
Proceeds
|
|
Gross
Realized
Gains
|
|
Gross
Realized
Losses
|
|
|
|
2011
|
|
$
|
321
|
|
$
|
|
|
$
|
|
|
|
|
2010
|
|
$
|
3,640
|
|
$
|
8
|
|
$
|
|
|
|
|
2009
|
|
$
|
5,316
|
|
$
|
10
|
|
$
|
|
|
Maturity Distribution
.
As of December 31, 2011, the Companys investment securities had the following
maturity distribution based on contractual maturities:
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Amortized Cost
|
|
Market Value
|
|
Due in one year or less
|
|
$
|
127,800
|
|
$
|
128,164
|
|
Due after one through five years
|
|
|
164,490
|
|
|
166,340
|
|
Due after five through ten years
|
|
|
1,190
|
|
|
1,288
|
|
Due over ten years
|
|
|
|
|
|
|
|
No Maturity
|
|
|
11,957
|
|
|
11,357
|
|
Total Investment Securities
|
|
$
|
305,437
|
|
$
|
307,149
|
|
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.
79
Other Than Temporarily Impaired Securities
.
The following table summarizes the investment securities with unrealized losses
at December 31, aggregated by major security type and length of time in a
continuous unrealized loss position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
Less Than
12 Months
|
|
Greater Than
12 Months
|
|
Total
|
|
(Dollars in Thousands)
|
|
Market
Value
|
|
Unrealized
Losses
|
|
Market
Value
|
|
Unrealized
Losses
|
|
Market
Value
|
|
Unrealized
Losses
|
|
U.S. Government Treasury
|
|
$
|
9,698
|
|
$
|
48
|
|
$
|
|
|
$
|
|
|
$
|
9,698
|
|
$
|
48
|
|
U.S. Government Agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and Political Subdivisions
|
|
|
14,597
|
|
|
38
|
|
|
|
|
|
|
|
|
14,597
|
|
|
38
|
|
Mortgage-Backed Securities
|
|
|
11,612
|
|
|
87
|
|
|
37
|
|
|
|
|
|
11,649
|
|
|
87
|
|
Other Securities
|
|
|
|
|
|
|
|
|
600
|
|
|
600
|
|
|
600
|
|
|
600
|
|
Total Investment Securities
|
|
$
|
35,907
|
|
$
|
173
|
|
$
|
637
|
|
$
|
600
|
|
$
|
36,544
|
|
$
|
773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
Less Than
12 Months
|
|
Greater Than
12 Months
|
|
Total
|
|
(Dollars in Thousands)
|
|
Market
Value
|
|
Unrealized
Losses
|
|
Market
Value
|
|
Unrealized
Losses
|
|
Market
Value
|
|
Unrealized
Losses
|
|
U.S. Government Treasury
|
|
$
|
36,103
|
|
$
|
134
|
|
$
|
|
|
$
|
|
|
$
|
36,103
|
|
$
|
134
|
|
U.S. Government Agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and Political Subdivisions
|
|
|
4,622
|
|
|
9
|
|
|
|
|
|
|
|
|
4,622
|
|
|
9
|
|
Mortgage-Backed Securities
|
|
|
33,990
|
|
|
560
|
|
|
|
|
|
|
|
|
33,990
|
|
|
560
|
|
Other Securities
|
|
|
|
|
|
|
|
|
600
|
|
|
600
|
|
|
600
|
|
|
600
|
|
Total Investment Securities
|
|
$
|
74,715
|
|
$
|
703
|
|
$
|
600
|
|
$
|
600
|
|
$
|
75,315
|
|
$
|
1,303
|
|
Management
evaluates securities for other than temporary impairment at least quarterly,
and more frequently when economic or market concerns warrant such evaluation.
Consideration is given to: 1) the length of time and the extent to which the
fair value has been less than amortized cost, 2) the financial condition and
near-term prospects of the issuer, and 3) the intent and ability of the Company
to retain its investment in the issuer for a period of time sufficient to allow
for recovery in the fair value above amortized cost. In analyzing an issuers
financial condition, management considers whether the securities are issued by
the federal government or its agencies, whether downgrades by rating agencies
have occurred, regulatory and analysts report.
At December
31, 2011, the Company had securities of $305.4 million with net pre-tax
unrealized gains of $1.7 million on these securities, of which $36.5 million
have unrealized losses totaling $0.8 million. Approximately $0.2 million of
these securities have been in a loss position for less than 12 months. These
securities are primarily in a loss position because they were acquired when the
general level of interest rates was lower than that on December 31, 2011. The
Company believes that the losses in these securities are temporary in nature
and that the full principal will be collected as anticipated. Because the
declines in the market value of these investments are attributable to changes
in interest rates and not credit quality and because the Company has the
ability and intent to hold these investments until there is a recovery in fair
value, which may be at maturity, the Company does not consider these
investments to be other-than-temporarily impaired at December 31, 2011. One
preferred bank stock issue for $0.6 million has been in a loss position for
greater than 12 months.
80
Note 3
LOANS
Loan Portfolio Composition
.
At December 31, the composition of the loan portfolio was as follows:
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
Commercial, Financial and Agricultural
|
|
$
|
130,879
|
|
$
|
157,394
|
|
Real Estate - Construction
|
|
|
26,367
|
|
|
43,239
|
|
Real Estate - Commercial
|
|
|
639,140
|
|
|
671,702
|
|
Real Estate - Residential(1)
|
|
|
385,621
|
|
|
424,229
|
|
Real Estate - Home Equity
|
|
|
244,263
|
|
|
251,565
|
|
Real Estate - Loans Held-for-Sale
|
|
|
13,750
|
|
|
6,312
|
|
Consumer
|
|
|
188,663
|
|
|
204,230
|
|
Loans, Net of Unearned Income
|
|
$
|
1,628,683
|
|
$
|
1,758,671
|
|
|
|
(1)
|
Includes loans in process with outstanding balances of $12.5 million
and $10.2 million for 2011 and 2010, respectively.
|
Net deferred
fees included in loans at December 31, 2011 and December 31, 2010 were $1.6
million and $1.8 million, respectively.
Past Due Loans
. A
loan is defined as a past due loan when one full payment is past due or a
contractual maturity is over 30 days past due (DPD).
The following
table presents the aging of the recorded investment in past due loans as of
December 31 by class of loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
(Dollars in Thousands)
|
|
30-59
DPD
|
|
60-89
DPD
|
|
90 +
DPD
|
|
Total
Past Due
|
|
Total
Current
|
|
Total
Loans
|
|
Commercial, Financial and Agricultural
|
|
$
|
307
|
|
$
|
49
|
|
$
|
46
|
|
$
|
402
|
|
$
|
129,722
|
|
$
|
130,879
|
|
Real Estate - Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,034
|
|
|
26,367
|
|
Real Estate - Commercial Mortgage
|
|
|
3,070
|
|
|
646
|
|
|
|
|
|
3,716
|
|
|
592,604
|
|
|
639,140
|
|
Real Estate - Residential
|
|
|
7,983
|
|
|
3,031
|
|
|
58
|
|
|
11,072
|
|
|
350,133
|
|
|
386,877
|
|
Real Estate - Home Equity
|
|
|
1,139
|
|
|
500
|
|
|
95
|
|
|
1,734
|
|
|
238,246
|
|
|
244,263
|
|
Consumer
|
|
|
2,355
|
|
|
345
|
|
|
25
|
|
|
2,725
|
|
|
197,272
|
|
|
201,157
|
|
Total Past Due Loans
|
|
$
|
14,854
|
|
$
|
4,571
|
|
$
|
224
|
|
$
|
19,649
|
|
$
|
1,534,011
|
|
$
|
1,628,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
(Dollars in Thousands)
|
|
30-59
DPD
|
|
60-89
DPD
|
|
90 +
DPD
|
|
Total
Past Due
|
|
Total
Current
|
|
Total
Loans
|
|
Commercial, Financial and Agricultural
|
|
$
|
645
|
|
$
|
193
|
|
$
|
|
|
$
|
838
|
|
$
|
155,497
|
|
$
|
157,394
|
|
Real Estate - Construction
|
|
|
314
|
|
|
129
|
|
|
|
|
|
443
|
|
|
40,890
|
|
|
43,239
|
|
Real Estate - Commercial Mortgage
|
|
|
5,577
|
|
|
840
|
|
|
|
|
|
6,417
|
|
|
638,411
|
|
|
671,702
|
|
Real Estate - Residential
|
|
|
7,171
|
|
|
3,958
|
|
|
120
|
|
|
11,249
|
|
|
389,103
|
|
|
430,541
|
|
Real Estate - Home Equity
|
|
|
1,445
|
|
|
698
|
|
|
39
|
|
|
2,182
|
|
|
244,579
|
|
|
251,565
|
|
Consumer
|
|
|
2,867
|
|
|
356
|
|
|
|
|
|
3,223
|
|
|
200,139
|
|
|
204,230
|
|
Total Past Due Loans
|
|
$
|
18,019
|
|
$
|
6,174
|
|
$
|
159
|
|
$
|
24,352
|
|
$
|
1,668,619
|
|
$
|
1,758,671
|
|
Nonaccrual Loans
.
Loans are generally placed on non-accrual status if principal or interest
payments become 90 days past due and/or management deems the collectability of
the principal and/or interest to be doubtful. Loans are returned to accrual
status when the principal and interest amounts contractually due are brought
current or when future payments are reasonably assured.
The following
table presents the recorded investment in nonaccrual loans and loans past due
over 90 days and still on accrual by class of loans as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
(Dollars in Thousands)
|
|
Nonaccrual
|
|
90 + Days
|
|
Nonaccrual
|
|
90 + Days
|
|
Commercial, Financial and Agricultural
|
|
$
|
755
|
|
|
46
|
|
$
|
1,059
|
|
$
|
|
|
Real Estate - Construction
|
|
|
334
|
|
|
|
|
|
1,907
|
|
|
|
|
Real Estate - Commercial Mortgage
|
|
|
42,820
|
|
|
|
|
|
26,874
|
|
|
|
|
Real Estate - Residential
|
|
|
25,671
|
|
|
58
|
|
|
30,189
|
|
|
120
|
|
Real Estate - Home Equity
|
|
|
4,283
|
|
|
95
|
|
|
4,803
|
|
|
39
|
|
Consumer
|
|
|
1,160
|
|
|
25
|
|
|
868
|
|
|
|
|
Total Nonaccrual Loans
|
|
$
|
75,023
|
|
|
224
|
|
$
|
65,700
|
|
$
|
159
|
|
81
Troubled Debt Restructurings (TDRs)
.
TDRs are loans in which the borrower is experiencing financial difficulty and
the Company has granted an economic concession to the borrower that it would
not otherwise consider. Concessions may include interest rate reductions or
below market interest rates, principal forgiveness, restructuring amortization
schedules and other actions intended to alleviate the borrowers near-term cash
requirements and minimize potential losses. Effective July 1, 2011, the Company
adopted the provisions of ASU No. 2011-02, Receivables (Topic 310) A
Creditors Determination of Whether a Restructuring Is a Troubled Debt
Restructuring.
The following
table presents loans classified as TDRs as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
(Dollars in Thousands)
|
|
Accruing
|
|
Nonaccruing
|
|
Accruing
|
|
Nonaccruing
|
|
Commercial, Financial and Agricultural
|
|
$
|
694
|
|
$
|
|
|
$
|
768
|
|
$
|
101
|
|
Real Estate - Construction
|
|
|
178
|
|
|
|
|
|
660
|
|
|
|
|
Real Estate - Commercial
|
|
|
20,062
|
|
|
12,029
|
|
|
10,635
|
|
|
5,742
|
|
Real Estate - Residential
|
|
|
15,553
|
|
|
947
|
|
|
8,884
|
|
|
615
|
|
Real Estate - Home Equity
|
|
|
1,161
|
|
|
|
|
|
648
|
|
|
|
|
Consumer
|
|
|
27
|
|
|
|
|
|
54
|
|
|
|
|
Total TDRs
|
|
$
|
37,675
|
|
$
|
12,976
|
|
$
|
21,649
|
|
$
|
6,458
|
|
Loans
classified as TDRs during the twelve months ended December 31, 2011 are
presented in the table below:
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
Number
of
Contracts
|
|
Pre-Modify
Recorded
Investment
|
|
Post-Modify
Recorded
Investment
|
|
Commercial,
Financial and Agricultural
|
|
7
|
|
$
|
568
|
|
$
|
547
|
|
Real Estate - Construction
|
|
5
|
|
|
3,679
|
|
|
3,752
|
|
Real Estate - Commercial
|
|
46
|
|
|
16,197
|
|
|
16,311
|
|
Real Estate - Residential
|
|
79
|
|
|
15,249
|
|
|
15,487
|
|
Real Estate - Home Equity
|
|
9
|
|
|
639
|
|
|
660
|
|
Consumer
|
|
2
|
|
|
24
|
|
|
23
|
|
Total TDRs
|
|
148
|
|
$
|
36,356
|
|
$
|
36,780
|
|
Loan
modifications made within the last 12 months that were classified as TDRs that
have subsequently defaulted are presented in the table below:
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Number of
Contracts
|
|
Post-Modify
Recorded
Investment
|
|
Commercial, Financial and Agricultural
|
|
|
2
|
|
$
|
218
|
|
Real Estate - Construction
|
|
|
1
|
|
|
2,327
|
|
Real Estate - Commercial
|
|
|
12
|
|
|
5,221
|
|
Real Estate - Residential
|
|
|
7
|
|
|
1,424
|
|
Real Estate - Home Equity
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
Total TDRs
|
|
|
22
|
|
$
|
9,190
|
|
82
Credit Quality Indicators
. As part of the
ongoing monitoring of the Companys loan portfolio quality, management
categorizes loans into risk categories based on relevant information about the
ability of borrowers to service their debt such as: current financial
information, historical payment performance, credit documentation, and current
economic/market trends, among other factors. Risk ratings are assigned to each
loan and revised as needed through established monitoring procedures for
individual loan relationships over a predetermined amount and review of smaller
balance homogenous loan pools. The Company uses the definitions noted below for
categorizing and managing its criticized loans. Loans categorized as Pass do
not meet the criteria set forth for the Special Mention, Substandard, or
Doubtful categories and are not considered criticized.
Special
Mention Loans in this category are presently protected from loss, but
weaknesses are apparent which, if not corrected, could cause future problems.
Loans in this category may not meet required underwriting criteria and have no
mitigating factors. More than the ordinary amount of attention is warranted for
these loans.
Substandard
Loans in this category exhibit well-defined weaknesses that would typically
bring normal repayment into jeopardy. These loans are no longer adequately
protected due to well-defined weaknesses that affect the repayment capacity of
the borrower. The possibility of loss is much more evident and above average
supervision is required for these loans.
Doubtful
Loans in this category have all the weaknesses inherent in a loan categorized
as Substandard, with the characteristic that the weaknesses make collection or
liquidation in full, on the basis of currently existing facts, conditions, and
values, highly questionable and improbable.
The following
table presents the risk category of loans by segment as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
(Dollars in Thousands)
|
|
|
Commercial,
Financial,
Agriculture
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Total Loans
|
|
Special
Mention
|
|
$
|
4,883
|
|
$
|
43,787
|
|
$
|
79
|
|
$
|
48,749
|
|
Substandard
|
|
|
9,804
|
|
|
202,734
|
|
|
1,699
|
|
|
214,237
|
|
Doubtful
|
|
|
111
|
|
|
7,763
|
|
|
|
|
|
7,874
|
|
Total
Criticized Loans
|
|
$
|
14,798
|
|
$
|
254,284
|
|
$
|
1,778
|
|
$
|
270,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
(Dollars in Thousands)
|
|
|
Commercial,
Financial,
Agriculture
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Total Loans
|
|
Special
Mention
|
|
$
|
20,539
|
|
$
|
100,008
|
|
$
|
102
|
|
$
|
120,649
|
|
Substandard
|
|
|
10,599
|
|
|
165,143
|
|
|
719
|
|
|
176,461
|
|
Doubtful
|
|
|
1,060
|
|
|
63,773
|
|
|
867
|
|
|
65,700
|
|
Total
Criticized Loans
|
|
$
|
32,198
|
|
$
|
328,924
|
|
$
|
1,688
|
|
$
|
362,810
|
|
During the
third quarter of 2011, the Company performed a review of its Special Mention
loan portfolio to determine proper alignment of its loan grading practices with
the regulatory definition of loans for this category. As a result of this
review, a new loan risk category was added to reflect loans that currently meet
existing credit underwriting guidelines, but warrant a greater level of
monitoring due to certain manageable credit policy exceptions or exposure to an
industry segment that is experiencing higher than normal risk levels. Loans of
this nature were reflected as Pass Watch loans within the Pass category as of
December 31, 2011 and are not considered criticized. The decline in the balance
of Special Mention loans from December 31, 2010 to December 31, 2011, reflects
the impact of this reclassification process.
83
Note 4
ALLOWANCE FOR LOAN LOSSES
An analysis of
the changes in the allowance for loan losses for December 31 was as follows:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Balance, Beginning of Year
|
|
$
|
35,436
|
|
$
|
43,999
|
|
$
|
37,004
|
|
Provision for Loan Losses
|
|
|
18,996
|
|
|
23,824
|
|
|
40,017
|
|
Recoveries on Loans Previously Charged-Off
|
|
|
2,794
|
|
|
3,127
|
|
|
3,442
|
|
Loans Charged-Off
|
|
|
(26,191
|
)
|
|
(35,514
|
)
|
|
(36,072
|
)
|
Reclassification of Unfunded Reserve to
Other Liability
|
|
|
|
|
|
|
|
|
(392
|
)
|
Balance, End of Year
|
|
$
|
31,035
|
|
$
|
35,436
|
|
$
|
43,999
|
|
The following
table details the activity in the allowance for loan losses by portfolio class
for the years ended December 31, 2011 and 2010. Allocation of a portion of the
allowance to one category of loans does not preclude its availability to absorb
losses in other categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Commercial,
Financial,
Agricultural
|
|
Real Estate
Construction
|
|
Real Estate Commercial
Mortgage
|
|
Real Estate
Residential
|
|
Real Estate
Home
Equity
|
|
Consumer
|
|
Unallocated
|
|
Total
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
1,544
|
|
$
|
2,060
|
|
$
|
8,645
|
|
$
|
17,046
|
|
$
|
2,522
|
|
$
|
2,612
|
|
$
|
1,007
|
|
$
|
35,436
|
|
Provision for Loan Losses
|
|
|
1,446
|
|
|
(827
|
)
|
|
8,477
|
|
|
6,864
|
|
|
2,383
|
|
|
749
|
|
|
(96
|
)
|
|
18,996
|
|
Charge-Offs
|
|
|
1,843
|
|
|
114
|
|
|
6,713
|
|
|
11,870
|
|
|
2,727
|
|
|
2,924
|
|
|
|
|
|
26,191
|
|
Recoveries
|
|
|
387
|
|
|
14
|
|
|
251
|
|
|
478
|
|
|
214
|
|
|
1,450
|
|
|
|
|
|
2,794
|
|
Net Charge-Offs
|
|
|
1,456
|
|
|
100
|
|
|
6,462
|
|
|
11,392
|
|
|
2,513
|
|
|
1,474
|
|
|
|
|
|
23,397
|
|
Ending Balance
|
|
$
|
1,534
|
|
$
|
1,133
|
|
$
|
10,660
|
|
$
|
12,518
|
|
$
|
2,392
|
|
$
|
1,887
|
|
$
|
911
|
|
$
|
31,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end amount allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Individually Evaluated for Impairment
|
|
$
|
311
|
|
$
|
68
|
|
$
|
5,828
|
|
$
|
4,702
|
|
$
|
239
|
|
$
|
26
|
|
$
|
|
|
$
|
11,174
|
|
Loans Collectively Evaluated for Impairment
|
|
|
1,223
|
|
|
1,065
|
|
|
4,832
|
|
|
7,816
|
|
|
2,153
|
|
|
1,861
|
|
|
911
|
|
|
19,861
|
|
Ending Balance
|
|
$
|
1,534
|
|
$
|
1,133
|
|
$
|
10,660
|
|
$
|
12,518
|
|
$
|
2,392
|
|
$
|
1,887
|
|
$
|
911
|
|
$
|
31,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
2,409
|
|
$
|
12,117
|
|
$
|
8,751
|
|
$
|
14,159
|
|
$
|
2,201
|
|
$
|
3,457
|
|
$
|
905
|
|
$
|
43,999
|
|
Provision for Loan Losses
|
|
|
883
|
|
|
(4,188
|
)
|
|
8,395
|
|
|
14,670
|
|
|
2,853
|
|
|
1,109
|
|
|
102
|
|
|
23,824
|
|
Charge-Offs
|
|
|
2,118
|
|
|
5,877
|
|
|
8,762
|
|
|
12,168
|
|
|
3,087
|
|
|
3,502
|
|
|
|
|
|
35,514
|
|
Recoveries
|
|
|
370
|
|
|
8
|
|
|
261
|
|
|
385
|
|
|
555
|
|
|
1,548
|
|
|
|
|
|
3,127
|
|
Net Charge-Offs
|
|
|
1,748
|
|
|
5,869
|
|
|
8,501
|
|
|
11,783
|
|
|
2,532
|
|
|
1,954
|
|
|
|
|
|
32,387
|
|
Ending Balance
|
|
$
|
1,544
|
|
$
|
2,060
|
|
$
|
8,645
|
|
$
|
17,046
|
|
$
|
2,522
|
|
$
|
2,612
|
|
$
|
1,007
|
|
$
|
35,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end amount allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Individually Evaluated for Impairment
|
|
$
|
252
|
|
$
|
413
|
|
$
|
4,640
|
|
$
|
7,965
|
|
$
|
1,389
|
|
$
|
71
|
|
$
|
|
|
$
|
14,730
|
|
Loans Collectively Evaluated for Impairment
|
|
|
1,292
|
|
|
1,647
|
|
|
4,005
|
|
|
9,081
|
|
|
1,133
|
|
|
2,541
|
|
|
1,007
|
|
|
20,706
|
|
Ending Balance
|
|
$
|
1,544
|
|
$
|
2,060
|
|
$
|
8,645
|
|
$
|
17,046
|
|
$
|
2,522
|
|
$
|
2,612
|
|
$
|
1,007
|
|
$
|
35,436
|
|
84
The Companys
recorded investment in loans as of December 31, 2011 and 2010 related to each
balance in the allowance for loan losses by portfolio class and disaggregated
on the basis of the Companys impairment methodology was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Commercial,
Financial,
Agricultural
|
|
Real Estate
Construction
|
|
Real Estate
Commercial
Mortgage
|
|
Real Estate
Residential
|
|
Real Estate
Home
Equity
|
|
Consumer
|
|
Unallocated
|
|
Total
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually Evaluated for Impairment
|
|
$
|
1,653
|
|
$
|
511
|
|
$
|
65,624
|
|
$
|
36,324
|
|
$
|
3,527
|
|
$
|
143
|
|
$
|
|
|
$
|
107,782
|
|
Collectively Evaluated for Impairment
|
|
|
129,226
|
|
|
25,856
|
|
|
573,516
|
|
|
363,047
|
|
|
240,736
|
|
|
188,520
|
|
|
|
|
|
1,520,901
|
|
Total
|
|
$
|
130,879
|
|
$
|
26,367
|
|
$
|
639,140
|
|
$
|
399,371
|
|
$
|
244,263
|
|
$
|
188,663
|
|
$
|
|
|
$
|
1,628,683
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually Evaluated for Impairment
|
|
$
|
1,685
|
|
$
|
2,533
|
|
$
|
42,369
|
|
$
|
37,779
|
|
$
|
3,278
|
|
$
|
144
|
|
$
|
|
|
$
|
87,788
|
|
Collectively Evaluated for Impairment
|
|
|
155,709
|
|
|
40,706
|
|
|
629,333
|
|
|
392,762
|
|
|
248,287
|
|
|
204,086
|
|
|
|
|
|
1,670,883
|
|
Total
|
|
$
|
157,394
|
|
$
|
43,239
|
|
$
|
671,702
|
|
$
|
430,541
|
|
$
|
251,565
|
|
$
|
204,230
|
|
$
|
|
|
$
|
1,758,671
|
|
Impaired Loans
.
Loans are deemed to be impaired when, based on current information and events,
it is probable that the Company will not be able to collect all amounts due
(principal and interest payments), according to the contractual terms of the
loan agreement. Loans, for which the terms have been modified, and for which
the borrower is experiencing financial difficulties, are considered troubled debt
restructurings and classified as impaired. Interest income recognized on
impaired loans was approximately $4.3 million, $1.4 million, and $3.4 million
for the years ended December 31, 2011, 2010, and 2009.
The following
table presents loans individually evaluated for impairment by class of loans as
of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Unpaid
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment With
Allowance
|
|
Related
Allowance
|
|
Average Recorded
Investment
|
|
2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
Financial and Agricultural
|
|
$
|
1,653
|
|
$
|
671
|
|
$
|
982
|
|
$
|
311
|
|
$
|
1,554
|
|
Real Estate
- Construction
|
|
|
511
|
|
|
|
|
|
511
|
|
|
68
|
|
|
1,775
|
|
Real Estate
- Commercial Mortgage
|
|
|
65,624
|
|
|
19,987
|
|
|
45,637
|
|
|
5,828
|
|
|
50,706
|
|
Real Estate
- Residential
|
|
|
36,324
|
|
|
6,897
|
|
|
29,427
|
|
|
4,702
|
|
|
30,988
|
|
Real Estate
- Home Equity
|
|
|
3,527
|
|
|
645
|
|
|
2,882
|
|
|
239
|
|
|
2,743
|
|
Consumer
|
|
|
143
|
|
|
90
|
|
|
53
|
|
|
26
|
|
|
90
|
|
Total
|
|
$
|
107,782
|
|
$
|
28,290
|
|
$
|
79,492
|
|
$
|
11,174
|
|
$
|
87,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
Financial and Agricultural
|
|
$
|
1,684
|
|
$
|
389
|
|
$
|
1,295
|
|
$
|
252
|
|
$
|
2,768
|
|
Real Estate
- Construction
|
|
|
2,533
|
|
|
|
|
|
2,533
|
|
|
413
|
|
|
5,801
|
|
Real Estate
- Commercial Mortgage
|
|
|
42,370
|
|
|
9,030
|
|
|
33,340
|
|
|
4,640
|
|
|
48,820
|
|
Real Estate
- Residential
|
|
|
37,780
|
|
|
3,295
|
|
|
34,485
|
|
|
7,965
|
|
|
41,958
|
|
Real Estate
- Home Equity
|
|
|
3,278
|
|
|
375
|
|
|
2,903
|
|
|
1,389
|
|
|
3,087
|
|
Consumer
|
|
|
143
|
|
|
|
|
|
143
|
|
|
71
|
|
|
172
|
|
Total
|
|
$
|
87,788
|
|
$
|
13,089
|
|
$
|
74,699
|
|
$
|
14,730
|
|
$
|
102,606
|
|
The average recorded investment in impaired loans was $121 million
in 2009.
85
Note 5
INTANGIBLE ASSETS
The Company
had intangible assets of $85.5 million and $86.2 million at December 31, 2011
and December 31, 2010, respectively. Intangible assets at December 31 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
(Dollars in Thousands)
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Core
Deposits Intangibles
|
|
$
|
47,176
|
|
$
|
46,918
|
|
$
|
47,176
|
|
$
|
46,434
|
|
Goodwill
|
|
|
84,811
|
|
|
|
|
|
84,811
|
|
|
|
|
Customer
Relationship Intangible
|
|
|
1,867
|
|
|
1,452
|
|
|
1,867
|
|
|
1,261
|
|
Total
Intangible Assets
|
|
$
|
133,854
|
|
$
|
48,370
|
|
$
|
133,854
|
|
$
|
47,695
|
|
Net Core Deposit Intangibles.
As
of December 31, 2011 and December 31, 2010, the Company had net core deposit
intangibles of $0.3 million and $0.7 million, respectively. Amortization
expense for the 12 months of 2011, 2010 and 2009 was approximately $0.5
million, $2.6 million, and $3.9 million, respectively. The estimated annual
amortization expense for 2012 is expected to be approximately $0.2 million. All
of the core deposit intangible assets will be fully amortized in January 2013.
Goodwill
: As of
December 31, 2011 and December 31, 2010, the Company had goodwill, net of
accumulated amortization, of $84.8 million. Goodwill is tested for impairment
on an annual basis, or more often if impairment indicators exist. A goodwill
impairment test consists of two steps. Step One compares the estimated fair
value of the reporting unit to its carrying amount. If the carrying amount
exceeds the estimated fair value, Step Two is performed by comparing the fair
value of the reporting units implied goodwill to the carrying value of
goodwill. If the carrying value of the reporting units goodwill exceeds the
estimated fair value, an impairment charge is recorded equal to the excess.
During the fourth quarter of 2011, the Company performed its annual goodwill
impairment test. The Step One test indicated that the carrying amount
(including goodwill) of the Companys reporting unit exceeded its estimated
fair value. The Step Two test indicated the estimated fair value of our
reporting units implied goodwill exceeded its carrying amount. Based on the
results of the Step Two analysis, the Company concluded that goodwill was not
impaired as of December 31, 2011.
Other
: As of
December 31, 2011 and December 31, 2010, the Company had a customer
relationship intangible asset, net of accumulated amortization, of $0.4 million
and $0.6 million, respectively. This intangible asset was recorded as a result
of the March 2004 acquisition of trust customer relationships. Amortization
expense for the twelve months of 2011 and 2010 was approximately $0.2 million.
Estimated annual amortization expense is approximately $0.2 million based on
use of a 10-year useful life.
Note 6
PREMISES AND EQUIPMENT
The
composition of the Companys premises and equipment at December 31 was as
follows:
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
Land
|
|
$
|
24,491
|
|
$
|
24,439
|
|
Buildings
|
|
|
115,211
|
|
|
115,031
|
|
Fixtures and
Equipment
|
|
|
57,066
|
|
|
57,414
|
|
Total
|
|
|
196,768
|
|
|
196,884
|
|
Accumulated
Depreciation
|
|
|
(85,777
|
)
|
|
(81,528
|
)
|
Premises and
Equipment, Net
|
|
$
|
110,991
|
|
$
|
115,356
|
|
86
Note 7
DEPOSITS
Interest
bearing deposits, by category, as of December 31, were as follows:
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
NOW Accounts
|
|
$
|
828,990
|
|
$
|
770,149
|
|
Money Market
Accounts
|
|
|
276,910
|
|
|
275,416
|
|
Savings
Accounts
|
|
|
158,462
|
|
|
139,888
|
|
Other Time
Deposits
|
|
|
289,840
|
|
|
372,266
|
|
Total Interest Bearing Deposits
|
|
$
|
1,554,202
|
|
$
|
1,557,719
|
|
At December
31, 2011 and 2010, $2.4 million and $3.5 million, respectively, in overdrawn
deposit accounts were reclassified as loans.
Deposits from
certain directors, executive officers, and their related interests totaled
$16.4 million and $23.0 million at December 31, 2011 and 2010, respectively.
Time deposits
in denominations of $100,000 or more totaled $85.7 million and $130.7 million
at December 31, 2011 and December 31, 2010, respectively.
At December
31, 2011, the scheduled maturities of time deposits were as follows:
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
2012
|
|
$
|
250,802
|
|
2013
|
|
|
24,567
|
|
2014
|
|
|
8,661
|
|
2015
|
|
|
3,531
|
|
2016 and
thereafter
|
|
|
2,279
|
|
Total
|
|
$
|
289,840
|
|
Interest
expense on deposits for the three years ended December 31, was as follows:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
NOW Accounts
|
|
$
|
890
|
|
$
|
1,406
|
|
$
|
1,039
|
|
Money Market
Accounts
|
|
|
437
|
|
|
1,299
|
|
|
1,288
|
|
Savings
Accounts
|
|
|
73
|
|
|
65
|
|
|
60
|
|
Time
Deposits < $100,000
|
|
|
1,958
|
|
|
4,602
|
|
|
5,362
|
|
Time
Deposits > $100,000
|
|
|
589
|
|
|
1,273
|
|
|
2,836
|
|
Total
|
|
$
|
3,947
|
|
$
|
8,645
|
|
$
|
10,585
|
|
87
Note 8
SHORT-TERM BORROWINGS
Short-term
borrowings included the following:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Federal
Funds
Purchased
|
|
Securities
Sold Under
Repurchase
Agreements(1)
|
|
Other
Short-Term
Borrowings
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
|
|
$
|
43,372
|
|
$
|
|
|
Maximum indebtedness at any month end
|
|
|
7,575
|
|
|
75,525
|
|
|
11,222
|
|
Daily average indebtedness outstanding
|
|
|
1,213
|
|
|
58,973
|
|
|
7,875
|
|
Average rate paid for the year
|
|
|
0.03
|
%
|
|
0.09
|
%
|
|
3.17
|
%
|
Average rate paid on period-end borrowings
|
|
|
|
%
|
|
0.05
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
10,275
|
|
$
|
71,633
|
|
$
|
11,020
|
(2)
|
Maximum indebtedness at any month end
|
|
|
12,550
|
|
|
71,633
|
|
|
11,792
|
|
Daily average indebtedness outstanding
|
|
|
6,269
|
|
|
16,733
|
|
|
4,861
|
|
Average rate paid for the year
|
|
|
0.02
|
%
|
|
0.12
|
%
|
|
2.84
|
%
|
Average rate paid on period-end borrowings
|
|
|
0.01
|
%
|
|
0.10
|
%
|
|
3.37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
8,350
|
|
$
|
25,520
|
|
$
|
1,972
|
(2)
|
Maximum indebtedness at any month end
|
|
|
93,400
|
|
|
46,672
|
|
|
21,434
|
|
Daily average indebtedness outstanding
|
|
|
41,702
|
|
|
31,270
|
|
|
6,349
|
|
Average rate paid for the year
|
|
|
0.56
|
%
|
|
0.08
|
%
|
|
0.44
|
%
|
Average rate paid on period-end borrowings
|
|
|
0.01
|
%
|
|
0.18
|
%
|
|
2.79
|
%
|
|
|
(1)
|
Balances are fully collateralized by government treasury or agency
securities held in the Companys investment portfolio.
|
|
|
(2)
|
Includes FHLB debt and client tax deposit balances of $10.0 million
and $1.0 million, respectively at December 31, 2010, and $0.6 million and
$1.4 million, respectively at December 31, 2009.
|
Note 9
LONG-TERM BORROWINGS
Federal Home Loan Bank Notes.
FHLB
advances totaled $44.6 million at December 31, 2011 and $60.1 million at
December 31, 2010. The advances mature at varying dates from 2013 through 2025
and had a weighted-average rate of 3.98% and 3.95% at December 31, 2011 and
2010. The FHLB advances are collateralized by a blanket floating lien on all
1-4 family residential mortgage loans, commercial real estate mortgage loans,
and home equity mortgage loans. Interest on the FHLB advances is paid on a
monthly basis.
Scheduled
minimum future principal payments on FHLB advances at December 31, 2011 were as
follows:
|
|
|
|
|
(Dollars
in Thousands)
|
|
|
|
|
2012
|
|
$
|
3,225
|
|
2013
|
|
|
9,677
|
|
2014
|
|
|
6,882
|
|
2015
|
|
|
5,431
|
|
2016
|
|
|
2,117
|
|
2017 and
thereafter
|
|
|
17,274
|
|
Total
|
|
$
|
44,606
|
|
88
Junior Subordinated Deferrable Interest
Notes.
The Company has issued two junior subordinated
deferrable interest notes to wholly owned Delaware statutory trusts. The first
note for $30.9 million was issued to CCBG Capital Trust I. The second note for
$32.0 million was issued to CCBG Capital Trust II. The two trusts are
considered variable interest entities for which the Company is not the primary
beneficiary. Accordingly, the accounts of the trusts are not included in the
Companys consolidated financial statements. See Note 1 - Summary of
Significant Accounting Policies for additional information about the Companys
consolidation policy. Details of the Companys transaction with the two trusts
are provided below.
In November
2004, CCBG Capital Trust I issued $30.0 million of trust preferred securities
which represent interest in the assets of the trust. The interest payments are
due quarterly at LIBOR plus a margin of 1.90%, adjusted quarterly. The trust
preferred securities will mature on December 31, 2034, and are redeemable upon
approval of the Federal Reserve in whole or in part at the option of the
Company at any time after December 31, 2009 and in whole at any time upon
occurrence of certain events affecting their tax or regulatory capital
treatment. Distributions on the trust preferred securities are payable
quarterly on March 31, June 30, September 30, and December 31 of each year.
CCBG Capital Trust I also issued $928,000 of common equity securities to CCBG.
The proceeds of the offering of trust preferred securities and common equity
securities were used to purchase a $30.9 million junior subordinated deferrable
interest note issued by the Company, which has terms similar to the trust
preferred securities.
In May 2005,
CCBG Capital Trust II issued $31.0 million of trust preferred securities which
represent interest in the assets of the trust. The interest payments are due
quarterly at LIBOR plus a margin of 1.80%, adjusted annually. The trust
preferred securities will mature on June 15, 2035, and are redeemable upon
approval of the Federal Reserve in whole or in part at the option of the
Company at any time after May 20, 2010 and in whole at any time upon occurrence
of certain events affecting their tax or regulatory capital treatment.
Distributions on the trust preferred securities are payable quarterly on March
15, June 15, September 15, and December 15 of each year. CCBG Capital Trust II
also issued $959,000 of common equity securities to CCBG. The proceeds of the
offering of trust preferred securities and common equity securities were used
to purchase a $32.0 million junior subordinated deferrable interest note issued
by the Company, which has terms substantially similar to the trust preferred
securities.
The Company
has the right to defer payments of interest on the two notes at any time or
from time to time for a period of up to twenty consecutive quarterly interest
payment periods. Under the terms of each note, in the event that under certain
circumstances there is an event of default under the note or the Company has
elected to defer interest on the note, the Company may not, with certain
exceptions, declare or pay any dividends or distributions on its capital stock
or purchase or acquire any of its capital stock. As of February 2012, in
consultation with the Federal Reserve, the Company elected to defer the
interest payments on the notes. The Company will, however, continue the
accrual of interest on the notes in accordance with their contractual
obligations.
The Company
has entered into agreements to guarantee the payments of distributions on the
trust preferred securities and payments of redemption of the trust preferred
securities. Under these agreements, the Company also agrees, on a subordinated
basis, to pay expenses and liabilities of the two trusts other than those
arising under the trust preferred securities. The obligations of the Company
under the two junior subordinated notes, the trust agreements establishing the
two trusts, the guarantee and agreement as to expenses and liabilities, in
aggregate, constitute a full and unconditional guarantee by the Company of the
two trusts obligations under the two trust preferred security issuances.
Despite the
fact that the accounts of CCBG Capital Trust I and CCBG Capital Trust II are
not included in the Companys consolidated financial statements, the $30.0
million and $31.0 million, respectively, in trust preferred securities issued
by these subsidiary trusts are included in the Tier I Capital of Capital City
Bank Group, Inc. as allowed by Federal Reserve guidelines.
Note 10
INCOME TAXES
The provision
for income taxes reflected in the statements of operations is comprised of the
following components:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
3,124
|
|
$
|
(5,392
|
)
|
$
|
2,340
|
|
State
|
|
|
424
|
|
|
525
|
|
|
417
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(1,828
|
)
|
|
3,990
|
|
|
(5,767
|
)
|
State
|
|
|
(1,350
|
)
|
|
(2,158
|
)
|
|
(2,475
|
)
|
Valuation Allowance
|
|
|
259
|
|
|
66
|
|
|
149
|
|
Total
|
|
$
|
629
|
|
$
|
(2,969
|
)
|
$
|
(5,336
|
)
|
89
Income taxes
provided were different than the tax expense computed by applying the statutory
federal income tax rate of 35% to pre-tax income as a result of the following:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Tax Expense at Federal Statutory Rate
|
|
$
|
1,934
|
|
$
|
(1,184
|
)
|
$
|
(3,083
|
)
|
Increases (Decreases) Resulting From:
|
|
|
|
|
|
|
|
|
|
|
Tax-Exempt Interest Income
|
|
|
(612
|
)
|
|
(955
|
)
|
|
(1,533
|
)
|
Change in Reserve for Uncertain Tax
Position
|
|
|
(168
|
)
|
|
127
|
|
|
687
|
|
State Taxes, Net of Federal Benefit
|
|
|
(602
|
)
|
|
(1,062
|
)
|
|
(1,337
|
)
|
Other
|
|
|
(182
|
)
|
|
39
|
|
|
(219
|
)
|
Change in Valuation Allowance
|
|
|
259
|
|
|
66
|
|
|
149
|
|
Actual Tax Expense
|
|
$
|
629
|
|
$
|
(2,969
|
)
|
$
|
(5,336
|
)
|
Deferred
income tax liabilities and assets result from differences between assets and
liabilities measured for financial reporting purposes and for income tax return
purposes. These assets and liabilities are measured using the enacted tax rates
and laws that are currently in effect. The net deferred tax asset and the
temporary differences comprising that balance at December 31, 2011 and 2010 are
as follows:
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
Deferred Tax Assets attributable to:
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
$
|
11,973
|
|
$
|
13,671
|
|
Associate Benefits
|
|
|
297
|
|
|
297
|
|
Accrued Pension/SERP
|
|
|
15,448
|
|
|
10,313
|
|
Interest on Nonperforming Loans
|
|
|
580
|
|
|
807
|
|
State Net Operating Loss and Tax Credit
Carry-Forwards
|
|
|
4,119
|
|
|
3,541
|
|
Federal Capital Loss and Credit
Carry-Forwards
|
|
|
287
|
|
|
|
|
Intangible Assets
|
|
|
198
|
|
|
173
|
|
Core Deposit Intangible
|
|
|
2,487
|
|
|
3,195
|
|
Contingency Reserve
|
|
|
241
|
|
|
52
|
|
Accrued Expense
|
|
|
437
|
|
|
466
|
|
Leases
|
|
|
410
|
|
|
407
|
|
Other Real Estate Owned
|
|
|
10,551
|
|
|
7,052
|
|
Other
|
|
|
895
|
|
|
1,008
|
|
Total Deferred Tax Assets
|
|
$
|
47,923
|
|
$
|
40,982
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities attributable to:
|
|
|
|
|
|
|
|
Depreciation on Premises and Equipment
|
|
$
|
6,843
|
|
$
|
6,411
|
|
Deferred Loan Fees and Costs
|
|
|
2,907
|
|
|
4,127
|
|
Net Unrealized Gains on Investment
Securities
|
|
|
880
|
|
|
677
|
|
Intangible Assets
|
|
|
2,819
|
|
|
2,519
|
|
Accrued Pension/SERP
|
|
|
3,368
|
|
|
4,256
|
|
Securities Accretion
|
|
|
|
|
|
2
|
|
Market Value on Loans Held for Sale
|
|
|
|
|
|
72
|
|
Other
|
|
|
1,638
|
|
|
1,560
|
|
Total Deferred Tax Liabilities
|
|
|
18,455
|
|
|
19,624
|
|
Valuation Allowance
|
|
|
1,118
|
|
|
859
|
|
Net Deferred Tax Assets
|
|
$
|
28,350
|
|
$
|
20,499
|
|
In the opinion
of management, it is more likely than not that all of the deferred tax assets,
with the exception of the separate state net operating loss carry-forward of
CCBG, the separate state net operating loss carry-forwards of an inactive
subsidiary, and certain of the Banks separate state tax credit carry-forwards,
will be realized. Accordingly, a valuation allowance for CCBGs separate state
net operating loss carry-forward was recorded in 2008 and increased for CCBGs
additional state operating loss carry-forward generated in 2009 through 2011.
This valuation allowance at year-end 2011 was $0.9 million. In addition, a
valuation allowance for the inactive subsidiarys separate state net operating
loss carry-forwards and for certain of the Banks state tax credit
carry-forwards was recorded in 2011 in the amount of $0.2 million. At year-end 2011,
the Company had state net operating loss carry-forwards of approximately $100
million, which expire at various dates from 2023 through 2031, federal capital
loss carry-forwards of approximately $0.1 million that expire in 2015, and
federal alternative minimum tax credit carry-forwards of approximately $0.3
million that never expire. The Bank also has state tax credit carry-forwards of
approximately $0.7 million, which expire at various dates from 2012 through
2016.
90
Changes in net deferred income tax assets
were:
|
|
|
|
|
|
|
|
(Dollars
in Thousands)
|
|
2011
|
|
2010
|
|
Balance at Beginning of Year
|
|
$
|
20,499
|
|
$
|
21,466
|
|
Income Tax Benefit From Change in Pension Liability
|
|
|
5,135
|
|
|
628
|
|
Income Tax (Expense) Benefit From Change in Unrealized (Gains) Losses
on Available-for-Sale Securities
|
|
|
(203
|
)
|
|
72
|
|
Income Tax Benefit From Changes in Other Temporary Impairment of
Securities
|
|
|
|
|
|
231
|
|
Deferred Income Tax
Benefit (Expense) on Continuing Operations
|
|
|
2,919
|
|
|
(1,898
|
)
|
Balance at End of Year
|
|
$
|
28,350
|
|
$
|
20,499
|
|
The Company had unrecognized
tax benefits at December 31, 2011, 2010, and 2009 of $4.6 million, $4.8
million, and $4.6 million, respectively, of which $3.0 million would increase
income from continuing operations, and thus impact the Companys effective tax
rate, if ultimately recognized into income.
A reconciliation of the
beginning and ending unrecognized tax benefit is as follows:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Balance at January 1,
|
|
$
|
4,770
|
|
$
|
4,589
|
|
$
|
3,916
|
|
Additions Based on Tax
Positions Related to Current Year
|
|
|
522
|
|
|
611
|
|
|
673
|
|
Decrease Due to Lapse in
Statue of Limitations
|
|
|
(715
|
)
|
|
(430
|
)
|
|
|
|
Decrease Based on Tax
Positions Related to Prior Year
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
4,577
|
|
$
|
4,770
|
|
$
|
4,589
|
|
It is the Companys policy
to recognize interest and penalties accrued relative to unrecognized tax
benefits in their respective federal or state income taxes accounts. The total amounts of interest and penalties
recorded in the income statement for the years ended December 31, 2011, 2010,
and 2009 were $(43,000), $9,000, and $250,000, respectively. The amounts accrued for interest and
penalties at December 31, 2011, 2010, and 2009 were $1.1 million for each
respective year.
No significant increases or
decreases in the amounts of unrecognized tax benefits are expected in the next
12 months.
The Company and its
subsidiaries file a consolidated U.S. federal income tax return, as well as
file various returns in states where its banking offices are located. The Company is no longer subject to U.S.
federal or state tax examinations for years before 2008.
91
Note 11
STOCK-BASED COMPENSATION
As of December 31, 2011, the
Company had three stock-based compensation plans, consisting of the 2011
Associate Incentive Plan (AIP), the 2011 Associate Stock Purchase Plan
(ASPP), and the 2011 Director Stock Purchase Plan (DSPP). These plans,
which were approved by the shareowners in April 2011, replaced substantially
similar plans approved by the shareowners in 2004. Total compensation expense associated with these plans for 2009
through 2011 was $0.2 million, $0.1 million, and $0.1 million,
respectively.
AIP.
The Companys AIP allows the Companys Board
of Directors to award key associates various forms of equity-based incentive
compensation. In 2011, the Company,
pursuant to the terms and conditions of the AIP, created the 2011 Incentive
Plan (2011 Plan), under which all participants in the 2011 plan were eligible
to earn performance shares. Awards
under the 2011 Plan were tied to an internally established earnings goal. The
grant-date fair value of the shares eligible to be awarded in 2011 was
approximately $0.9 million. A total of 51,952 shares were eligible for
issuance. No performance shares were
awarded in 2011.
For 2009 through 2011, the
Company recognized no expense for the AIP or a predecessor plan. 875,000 shares
of common stock have been reserved for issuance under the AIP. The Company issued no shares of common stock
under the 2011 AIP.
Executive Stock Option Agreement.
Prior
to 2007, the Company maintained a stock option program 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 an
annual 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. For 2009 through
2011, the Company recognized no expense related to this plan.
A summary of the status of
the Companys option shares is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at January 1,
2011
|
|
|
60,384
|
|
$
|
32.79
|
|
$
|
3.9
|
|
$
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December
31, 2011
|
|
|
60,384
|
|
$
|
32.79
|
|
$
|
2.9
|
|
$
|
|
|
Exercisable at December
31, 2011
|
|
|
60,384
|
|
$
|
32.79
|
|
$
|
2.9
|
|
$
|
|
|
DSPP.
The Companys DSPP allows the directors to
purchase the Companys 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 directors annual
retainer and meeting fees. The DSPP has
150,000 shares reserved for issuance.
For 2011, the Company issued 21,872 shares under the DSPP and recognized
approximately $23,000 in expense related to this plan. For 2010, the Company issued 22,152 shares
and recognized approximately $26,000 in expense related to the DSPP. In 2009, 19,300 shares were issued and
approximately $26,000 in expense was recognized under the DSPP.
ASPP.
Under the Companys ASPP, substantially all
associates may purchase the Companys 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 associates
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. For 2011, the Company issued 38,210 shares under the ASPP and
recognized approximately $72,000 in expense related to this plan. For 2010, the Company issued 41,486 shares
and recognized approximately $109,000 in expense related to the ASPP. For 2009, the Company issued 29,804 shares
and recognized approximately $144,000 in expense under the ASPP.
Based on the Black-Scholes
option pricing model, the weighted average estimated fair value of each of the
purchase rights granted under the ASPP was $1.74 for 2011. For 2010 and 2009, the weighted average fair
value purchase right granted was $2.67 and $5.97, respectively. In calculating compensation, the fair value
of each stock purchase right was estimated on the date of grant using the
following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Dividend yield
|
|
|
3.5
|
%
|
|
4.4
|
%
|
|
3.7
|
%
|
Expected volatility
|
|
|
31.0
|
%
|
|
41.0
|
%
|
|
67.5
|
%
|
Risk-free interest rate
|
|
|
0.2
|
%
|
|
0.2
|
%
|
|
0.3
|
%
|
Expected life (in years)
|
|
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
92
Note 12
EMPLOYEE BENEFIT PLANS
Pension Plan
The Company sponsors a
noncontributory pension plan covering substantially all of its associates. Benefits under this plan generally are based
on the associates total years of service and average of the five highest years
of compensation during the ten years immediately preceding their
departure. The Companys general
funding policy is to contribute amounts sufficient to meet minimum funding
requirements as set by law and to ensure deductibility for federal income tax
purposes.
The following table details
on a consolidated basis the components of pension expense, the funded status of
the plan, amounts recognized in the Companys consolidated statements of
financial condition, and major assumptions used to determine these amounts.
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Change in Projected Benefit Obligation:
|
|
|
|
|
|
|
|
|
|
|
Benefit Obligation at Beginning of Year
|
|
$
|
97,393
|
|
$
|
83,749
|
|
$
|
79,607
|
|
Service Cost
|
|
|
6,027
|
|
|
5,691
|
|
|
5,593
|
|
Interest Cost
|
|
|
5,243
|
|
|
4,733
|
|
|
4,588
|
|
Actuarial Loss/(Gain)
|
|
|
9,430
|
|
|
5,201
|
|
|
(2,977
|
)
|
Benefits Paid
|
|
|
(1,846
|
)
|
|
(1,776
|
)
|
|
(2,829
|
)
|
Expenses Paid
|
|
|
(245
|
)
|
|
(205
|
)
|
|
(233
|
)
|
Plan Amendment
|
|
|
171
|
|
|
|
|
|
|
|
Projected Benefit
Obligation at End of Year
|
|
$
|
116,173
|
|
$
|
97,393
|
|
$
|
83,749
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Benefit
Obligation at End of Year
|
|
$
|
94,121
|
|
$
|
77,100
|
|
$
|
64,889
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets:
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Plan Assets at Beginning of Year
|
|
$
|
84,658
|
|
$
|
79,547
|
|
$
|
66,363
|
|
Actual Return on Plan Assets
|
|
|
277
|
|
|
7,092
|
|
|
8,246
|
|
Employer Contributions
|
|
|
5,000
|
|
|
|
|
|
8,000
|
|
Benefits Paid
|
|
|
(1,846
|
)
|
|
(1,776
|
)
|
|
(2,829
|
)
|
Expenses Paid
|
|
|
(245
|
)
|
|
(205
|
)
|
|
(233
|
)
|
Fair Value of Plan Assets at End of Year
|
|
$
|
87,844
|
|
$
|
84,658
|
|
$
|
79,547
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Recognized in the Consolidated Statements of Financial
Condition:
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Other Liabilities
|
|
|
28,330
|
|
|
12,735
|
|
|
4,202
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts (Pre-Tax) Recognized in Accumulated Other Comprehensive
Income:
|
|
|
|
|
|
|
|
|
|
|
Net Actuarial Losses
|
|
$
|
38,924
|
|
$
|
25,438
|
|
$
|
23,224
|
|
Prior Service Cost
|
|
|
2,060
|
|
|
2,351
|
|
|
2,860
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Periodic Benefit Costs:
|
|
|
|
|
|
|
|
|
|
|
Service Cost
|
|
$
|
6,027
|
|
$
|
5,691
|
|
$
|
5,593
|
|
Interest Cost
|
|
|
5,243
|
|
|
4,733
|
|
|
4,588
|
|
Expected Return on Plan Assets
|
|
|
(6,555
|
)
|
|
(6,194
|
)
|
|
(5,060
|
)
|
Amortization of Prior Service Costs
|
|
|
462
|
|
|
509
|
|
|
509
|
|
Net Loss Amortization
|
|
|
2,223
|
|
|
2,088
|
|
|
2,954
|
|
Net Periodic Benefit Cost
|
|
$
|
7,400
|
|
$
|
6,827
|
|
$
|
8,584
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
|
|
Weighted-average used to determine benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
|
5.00
|
%
|
|
5.55
|
%
|
|
5.75
|
%
|
Rate of Compensation Increase
|
|
|
4.00
|
%
|
|
4.25
|
%
|
|
4.50
|
%
|
Measurement Date
|
|
|
12/31/11
|
|
|
12/31/10
|
|
|
12/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average used to determine net cost:
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
|
5.55
|
%
|
|
5.75
|
%
|
|
6.00
|
%
|
Expected Return on Plan Assets
|
|
|
8.00
|
%
|
|
8.00
|
%
|
|
8.00
|
%
|
Rate of Compensation Increase
|
|
|
4.25
|
%
|
|
4.50
|
%
|
|
5.50
|
%
|
93
Other Comprehensive Income
.
The estimated amounts that will be amortized from accumulated other
comprehensive income into net periodic benefit cost in 2012 are as follows:
|
|
|
|
|
(Dollars in Thousands)
|
|
2012
|
|
Actuarial Loss
|
|
$
|
3,430
|
|
Prior Service Cost
|
|
|
359
|
|
Total
|
|
$
|
3,789
|
|
Plan Assets.
The
Companys pension plan asset allocation at year-end 2011 and 2010, and the
target asset allocation for 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
Allocation
|
|
Percentage of Plan
Assets at Year-End
(1)
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
Equity Securities
|
|
|
65
|
%
|
|
51
|
%
|
|
50
|
%
|
Debt Securities
|
|
|
30
|
%
|
|
33
|
%
|
|
36
|
%
|
Cash Equivalent
|
|
|
5
|
%
|
|
16
|
%
|
|
14
|
%
|
Total
|
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
(1)
|
Represents asset allocation at year-end which may differ from the
average target allocation for the year due to the year-end cash contribution
to the plan.
|
The Companys
pension plan assets are overseen by the CCBG Retirement Committee. Capital City
Trust Company acts as the investment manager for the plan. The investment
strategy is to maximize return on investments while minimizing risk. The
Company believes the best way to accomplish this goal is to take a conservative
approach to its investment strategy by investing in high-grade equity and debt
securities. The overall expected long-term rate of return on assets is a
weighted-average expectation for the return on plan assets. The Company
considers historical performance data and economic/financial data to arrive at
expected long-term rates of return for each asset category.
The major
categories of assets in the Companys pension plan as of year-end are presented
in the following table. Assets are segregated by the level of the valuation
inputs within the fair value hierarchy established by ASC Topic 820 utilized to
measure fair value (see Note 19 Fair Value Measurements).
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
Level 1:
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
4,039
|
|
$
|
4,837
|
|
Common Stocks
|
|
|
14,084
|
|
|
11,935
|
|
Mutual Funds
|
|
|
44,382
|
|
|
40,267
|
|
Cash and Cash Equivalents
|
|
|
12,287
|
|
|
11,374
|
|
|
|
|
|
|
|
|
|
Level 2:
|
|
|
|
|
|
|
|
U.S. Government Agencies and Corporations
|
|
|
13,052
|
|
|
16,245
|
|
|
|
|
|
|
|
|
|
Total Fair Value of Plan Assets
|
|
$
|
87,844
|
|
$
|
84,658
|
|
94
Expected Benefit Payments
.
As of December 31, 2011, expected benefit payments related to the defined
benefit pension plan were as follows:
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
2012
|
|
$
|
5,509
|
|
2013
|
|
|
6,207
|
|
2014
|
|
|
7,291
|
|
2015
|
|
|
9,071
|
|
2016
|
|
|
7,775
|
|
2017 through 2021
|
|
|
46,669
|
|
Total
|
|
$
|
82,522
|
|
Contributions.
The
following table details the amounts contributed to the pension plan in 2011 and
2010, and the expected amount to be contributed in 2012.
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
(1)
|
|
Expected Range of
Contribution
2012
(2)
|
|
Actual
Contributions
|
|
$
|
5,000
|
|
$
|
|
|
$6,000 - $8,000
|
|
|
|
(1)
|
For 2010, the Company did not make a contribution to its pension plan
due to adequacy of its funding level.
|
(2)
|
For 2012, the Company will have the option to make a cash contribution
to the plan or utilize pre-funding balances.
|
95
Supplemental Executive Retirement Plan
The Company
has a Supplemental Executive Retirement Plan (SERP) covering selected
executive officers. Benefits under this plan generally are based on the same
service and compensation as used for the pension plan, except the benefits are
calculated without regard to the limits set by the Internal Revenue Code on
compensation and benefits. The net benefit payable from the SERP is the
difference between this gross benefit and the benefit payable by the pension
plan.
The following
table details the components of the SERPs periodic benefit cost, the funded
status of the plan, amounts recognized in the Companys consolidated statements
of financial condition, and major assumptions used to determine these amounts.
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Change in Projected Benefit Obligation:
|
|
|
|
|
|
|
|
|
|
|
Benefit Obligation at Beginning of Year
|
|
$
|
3,001
|
|
$
|
3,174
|
|
$
|
5,033
|
|
Service Cost
|
|
|
|
|
|
|
|
|
20
|
|
Interest Cost
|
|
|
147
|
|
|
150
|
|
|
178
|
|
Actuarial Gain
|
|
|
(151
|
)
|
|
(323
|
)
|
|
(2,057
|
)
|
Plan Amendment
|
|
|
33
|
|
|
|
|
|
|
|
Projected Benefit Obligation at End of Year
|
|
$
|
3,030
|
|
$
|
3,001
|
|
$
|
3,174
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Benefit Obligation at End of
Year
|
|
$
|
3,030
|
|
$
|
2,996
|
|
$
|
2,889
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Recognized in the Consolidated
Statements of Financial Condition:
|
|
|
|
|
|
|
|
|
|
|
Other Liabilities
|
|
$
|
3,030
|
|
$
|
3,001
|
|
$
|
3,174
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts (Pre-Tax) Recognized in Accumulated
Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
Net Actuarial Gain
|
|
$
|
(1,490
|
)
|
$
|
(1,753
|
)
|
$
|
(1,854
|
)
|
Prior Service Cost
|
|
|
547
|
|
|
694
|
|
|
874
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Periodic Benefit Costs:
|
|
|
|
|
|
|
|
|
|
|
Service Cost
|
|
$
|
|
|
$
|
|
|
$
|
20
|
|
Interest Cost
|
|
|
147
|
|
|
150
|
|
|
178
|
|
Amortization of Prior Service Cost
|
|
|
180
|
|
|
180
|
|
|
180
|
|
Net Gain Amortization
|
|
|
(413
|
)
|
|
(424
|
)
|
|
(350
|
)
|
Net Periodic Benefit Cost
|
|
$
|
(86
|
)
|
$
|
(94
|
)
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
|
|
Weighted-average used to determine the
benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
|
5.00
|
%
|
|
5.55
|
%
|
|
5.75
|
%
|
Rate of Compensation Increase
|
|
|
4.00
|
%
|
|
4.25
|
%
|
|
4.50
|
%
|
Measurement Date
|
|
|
12/31/11
|
|
|
12/31/10
|
|
|
12/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average used to determine the net
cost:
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
|
5.50
|
%
|
|
5.75
|
%
|
|
6.00
|
%
|
Rate of Compensation Increase
|
|
|
4.25
|
%
|
|
4.50
|
%
|
|
5.50
|
%
|
96
Expected Benefit Payments
.
As of December 31, 2011, expected benefit payments related to the SERP were as
follows:
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
2012
|
|
$
|
337
|
|
2013
|
|
|
330
|
|
2014
|
|
|
386
|
|
2015
|
|
|
398
|
|
2016
|
|
|
184
|
|
2017 through 2021
|
|
|
175
|
|
Total
|
|
$
|
1,810
|
|
401(k) Plan
The Company
has a 401(k) Plan which enables associates to defer a portion of their salary
on a pre-tax basis. The plan covers substantially all associates of the Company
who meet minimum age requirements. The plan is designed to enable participants
to elect to have an amount from 1% to 15% of their compensation withheld in any
plan year placed in the 401(k) Plan trust account. Matching contributions of
50% from the Company are made up to 6% of the participants compensation for
eligible associates. During 2011, 2010, and 2009, the Company made matching
contributions of $0.4 million, $0.4 million, and $0.4 million, respectively.
The participant may choose to invest their contributions into twenty-four
investment options available to 401(k) participants, including the Companys
common stock. A total of 50,000 shares of CCBG common stock have been reserved
for issuance. These shares have historically been purchased in the open market.
Other Plans
The Company
has a Dividend Reinvestment and Optional Stock Purchase Plan. A total of
250,000 shares have been reserved for issuance. In recent years, shares for the
Dividend Reinvestment and Optional Stock Purchase Plan have been acquired in
the open market and, thus, the Company did not issue any shares under this plan
in 2011, 2010 and 2009.
Note 13
EARNINGS PER SHARE
The following
table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands, Except Per Share Data)
|
|
2011
|
|
2010
|
|
2009
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
4,897
|
|
$
|
(413
|
)
|
$
|
(3,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Denominator for Basic Earnings Per Share
Weighted-Average Shares
|
|
|
17,139,558
|
|
|
17,075,867
|
|
|
17,043,964
|
|
Effects of Dilutive Securities Stock
Compensation Plans
|
|
|
832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for Diluted Earnings Per Share
Adjusted Weighted-Average Shares and Assumed Conversions
|
|
|
17,140,390
|
|
|
17,075,867
|
|
|
17,043,964
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share
|
|
$
|
0.29
|
|
$
|
(0.02
|
)
|
$
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share
|
|
$
|
0.29
|
|
$
|
(0.02
|
)
|
$
|
(0.20
|
)
|
Stock options
for 23,138 and 37,246 shares of common stock related to awards earned in 2003
and 2004, respectively, were not considered in computing diluted earnings per
common share for 2011, 2010 and 2009 because they were anti-dilutive.
97
Note 14
CAPITAL
The Company is
subject to various regulatory capital requirements which involve quantitative
measures of the Companys assets, liabilities and certain off-balance sheet
items. The Companys capital amounts and classification are subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors. Quantitative measures established by regulation to ensure
capital adequacy require that the Company maintain amounts and ratios (set
forth in the table below) of total and Tier I Capital to risk-weighted assets,
and of Tier I Capital to average assets. As of December 31, 2011, the Company
met all capital adequacy requirements to which it is subject.
A summary of
actual, required, and capital levels necessary to be considered
well-capitalized for Capital City Bank Group, Inc. consolidated and its banking
subsidiary, CCB, as of December 31, 2011 and December 31, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
Required
For Capital
Adequacy Purposes
|
|
To Be Well-
Capitalized Under
Prompt Corrective
Action Provisions
|
|
(Dollars in
Thousands)
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
As of December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I Capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG
|
|
$
|
246,455
|
|
|
13.96
|
%
|
$
|
70,964
|
|
|
4.00
|
%
|
|
*
|
|
|
*
|
|
CCB
|
|
|
246,159
|
|
|
13.96
|
%
|
|
70,904
|
|
|
4.00
|
%
|
|
106,356
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG
|
|
|
270,518
|
|
|
15.32
|
%
|
|
141,928
|
|
|
8.00
|
%
|
|
*
|
|
|
*
|
|
CCB
|
|
|
268,317
|
|
|
15.21
|
%
|
|
141,809
|
|
|
8.00
|
%
|
|
177,261
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I Leverage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG
|
|
|
246,455
|
|
|
10.26
|
%
|
|
70,964
|
|
|
4.00
|
%
|
|
*
|
|
|
*
|
|
CCB
|
|
|
246,159
|
|
|
10.26
|
%
|
|
70,904
|
|
|
4.00
|
%
|
|
88,630
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I Capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG
|
|
$
|
249,619
|
|
|
13.24
|
%
|
$
|
75,920
|
|
|
4.00
|
%
|
|
*
|
|
|
*
|
|
CCB
|
|
|
240,270
|
|
|
12.77
|
%
|
|
75,734
|
|
|
4.00
|
%
|
|
113,601
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG
|
|
|
275,231
|
|
|
14.59
|
%
|
|
151,840
|
|
|
8.00
|
%
|
|
*
|
|
|
*
|
|
CCB
|
|
|
263,937
|
|
|
14.03
|
%
|
|
151,469
|
|
|
8.00
|
%
|
|
189,336
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I Leverage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG
|
|
|
249,619
|
|
|
10.10
|
%
|
|
75,920
|
|
|
4.00
|
%
|
|
*
|
|
|
*
|
|
CCB
|
|
|
240,270
|
|
|
9.74
|
%
|
|
75,734
|
|
|
4.00
|
%
|
|
94,668
|
|
|
5.00
|
%
|
|
|
*
|
Not applicable to bank holding companies.
|
Note 15
DIVIDEND RESTRICTIONS
Substantially
all the Companys retained earnings are undistributed earnings of its banking
subsidiary which are restricted by various regulations administered by federal
and state bank regulatory authorities.
The approval
of the appropriate regulatory authority is required if the total of all
dividends declared by a subsidiary bank in any calendar year exceeds the banks
net profits (as defined) for that year combined with its retained net profits
for the preceding two calendar years. In addition, pursuant to the Federal
Reserve Resolutions, the Bank must receive prior approval from its regulators to issue and
declare any further dividends to CCBG. Moreover, CCBG must receive approval
from the Federal Reserve to pay any dividends to its shareowners.
98
Note 16
RELATED PARTY INFORMATION
At December
31, 2011 and 2010, certain officers and directors were indebted to the
Companys bank subsidiary in the aggregate amount of $20.8 million and $21.8
million, respectively. During 2011, $30.8 million in new loans were made and
repayments totaled $31.8 million. In the opinion of management, these loans
were made on similar terms as loans to other individuals of comparable
creditworthiness and were all current at year-end.
Under a lease
agreement expiring in 2024, the Bank leases land from a partnership in which
several directors and officers have an interest. The lease agreement with Smith
Interests General Partnership L.L.P. provides for annual lease payments of
approximately $136,000, to be adjusted for inflation in future years.
Note 17
SUPPLEMENTARY INFORMATION
Components of
other noninterest income and noninterest expense in excess of 1% of the sum of
total interest income and noninterest income, which are not disclosed
separately elsewhere, are presented below for each of the respective years.
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Noninterest
Income:
|
|
|
|
|
|
|
|
|
|
|
Merchant Fee
Income
|
|
$
|
1
|
(1)
|
$
|
1,118
|
(1)
|
$
|
2,359
|
|
Interchange
Commission Fees
|
|
|
5,622
|
|
|
5,077
|
|
|
4,432
|
|
ATM/Debit
Card Fees
|
|
|
4,519
|
|
|
4,123
|
|
|
3,515
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Expense:
|
|
|
|
|
|
|
|
|
|
|
Maintenance
Agreements - FF&E
|
|
|
3,114
|
|
|
3,185
|
|
|
3,225
|
|
Legal Fees
|
|
|
4,106
|
|
|
4,301
|
|
|
3,975
|
|
Professional
Fees
|
|
|
3,832
|
|
|
4,338
|
|
|
4,501
|
|
Interchange
Fees
|
|
|
4
|
(1)
|
|
955
|
(1)
|
|
1,929
|
|
Telephone
|
|
|
1,895
|
|
|
2,059
|
|
|
2,227
|
|
Advertising
|
|
|
2,471
|
|
|
2,905
|
|
|
3,285
|
|
Processing
Services
|
|
|
3,708
|
|
|
3,651
|
|
|
3,591
|
|
Insurance -
Other
|
|
|
4,474
|
|
|
6,324
|
|
|
5,167
|
|
Printing and
Supplies
|
|
|
1,321
|
(1)
|
|
1,455
|
(1)
|
|
1,882
|
|
Postage
|
|
|
1,780
|
|
|
1,650
|
|
|
1,711
|
|
|
|
(1)
|
Less than 1% of the appropriate threshold.
|
Note 18
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 Companys
maximum exposure to credit loss under standby letters of credit and commitments
to extend credit is represented by the contractual amount of those instruments.
The Company uses the same credit policies in establishing commitments and
issuing letters of credit as it does for on-balance sheet instruments. As of
December 31, the amounts associated with the Companys off-balance sheet
obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
(Dollars in Thousands)
|
|
Fixed
|
|
Variable
|
|
Total
|
|
Fixed
|
|
Variable
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
to Extend Credit(1)
|
|
|
38,432
|
|
|
257,081
|
|
|
295,513
|
|
|
66,021
|
|
|
264,746
|
|
|
330,767
|
|
Standby
Letters of Credit
|
|
|
10,920
|
|
|
|
|
|
10,920
|
|
|
12,675
|
|
|
|
|
|
12,675
|
|
Total
|
|
|
49,352
|
|
|
257,081
|
|
|
306,433
|
|
|
78,696
|
|
|
264,746
|
|
|
343,442
|
|
|
|
(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.
99
Standby
letters of credit are conditional commitments issued by the Company to
guarantee the performance of a client to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities. In general, management does not anticipate any
material losses as a result of participating in these types of transactions.
However, any potential losses arising from such transactions are reserved for
in the same manner as management reserves for its other credit facilities.
For both on-
and off-balance sheet financial instruments, the Company requires collateral to
support such instruments when it is deemed necessary. The Company evaluates
each clients creditworthiness on a case-by-case basis. The amount of
collateral obtained upon extension of credit is based on managements credit
evaluation of the counterparty. Collateral held varies, but may include
deposits held in financial institutions; U.S. Treasury securities; other
marketable securities; real estate; accounts receivable; property, plant and
equipment; and inventory.
Other Commitments
.
In the normal course of business, the Company enters into lease commitments
which are classified as operating leases. Rent expense incurred under these
leases was approximately $0.6 million in 2011, $1.2 million in 2010, and $1.5
million in 2009. Minimum lease payments under these leases due in each of the
five years subsequent to December 31, 2011, are as follows (dollars in
millions): 2012, $0.7; 2013, $0.6; 2014, $0.4; 2015, $0.4; 2016, $0.4,
thereafter, $4.0.
Contingencies
. The
Company is a party to lawsuits and claims arising out of the normal course of
business. In managements 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.
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 it for potential future settlement
of certain litigation (the Covered Litigation). In 2008, the Company, as a
member of the Visa U.S.A. network, obtained Class B shares of Visa, Inc. upon
its initial public offering. Since its initial public offering, Visa, Inc. has
funded a litigation reserve for the Covered Litigation resulting in a reduction
in the Class B shares held by the Company. During the first quarter of 2011,
the Company sold its remaining Class B shares resulting in a $3.2 million
pre-tax gain. Associated with this sale, the Company entered into a swap
contract with the purchaser of the shares that requires a payment to the
counterparty in the event that Visa, Inc. makes subsequent revisions to the
conversion ratio for its Class B shares. Further information on the swap
contract is contained within Note 19 below.
Note 19
FAIR VALUE MEASUREMENTS
The fair value
of an asset or liability is the price that would be received to sell that asset
or paid to transfer that liability in an orderly transaction occurring in the
principal market (or most advantageous market in the absence of a principal
market) for such asset or liability. In estimating fair value, the Company
utilizes valuation techniques that are consistent with the market approach, the
income approach and/or the cost approach. Such valuation techniques are
consistently applied. Inputs to valuation techniques include the assumptions
that market participants would use in pricing an asset or liability. ASC
Topic 820 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:
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 entitys 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.
100
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
Companys creditworthiness, among other things, as well as unobservable
parameters. Any such valuation adjustments are applied consistently over time.
The Companys 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 Companys 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.
Financial Assets and Financial Liabilities.
The following table summarizes financial assets and financial liabilities
measured at fair value on a recurring basis as of December 31, 2011, 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
|
|
Total Fair
Value
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
169,464
|
|
$
|
|
|
$
|
|
|
$
|
169,464
|
|
U.S. Government Agencies and Corporations
|
|
|
14,737
|
|
|
|
|
|
|
|
|
14,737
|
|
State and Political Subdivisions
|
|
|
|
|
|
59,094
|
|
|
|
|
|
59,094
|
|
Mortgage-Backed Securities
|
|
|
|
|
|
52,497
|
|
|
|
|
|
52,497
|
|
Other Securities
|
|
|
|
|
|
11,357
|
|
|
|
|
|
11,357
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
Swap
|
|
|
|
|
|
|
|
|
572
|
|
|
572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
162,151
|
|
$
|
|
|
$
|
|
|
$
|
162,151
|
|
U.S. Government Agencies and Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and Political Subdivisions
|
|
|
|
|
|
79,300
|
|
|
|
|
|
79,300
|
|
Mortgage-Backed Securities
|
|
|
|
|
|
56,217
|
|
|
|
|
|
56,217
|
|
Other Securities
|
|
|
|
|
|
12,064
|
|
|
|
|
|
12,064
|
|
Non-Financial Assets and Non-Financial
Liabilities.
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).
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. The fair value of collateral is determined by an independent
valuation or professional appraisal in conformance with banking regulations.
Collateral values are estimated using Level 3 inputs due to the volatility in
the real estate market, and the judgment and estimation involved in the real
estate appraisal process. Impaired loans had a carrying value of $107.8 million,
with a valuation allowance of $11.2 million, at December 31, 2011 compared to
$87.8 million and $14.7 million, respectively, at December 31, 2010.
Loans Held for Sale
.
Loans held for sale of $13.8 million, which are carried at the lower of cost or
fair value, 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.
Other Real Estate Owned
.
During the 12 months of 2011, 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 is determined by an
independent valuation or professional appraisal in conformance with banking
regulations. The fair value of foreclosed assets is estimated using Level 3
inputs due to the volatility of the real estate market, and judgment and
estimation involved in the real estate valuation process. Foreclosed assets
measured at fair value upon initial recognition totaled $37.4 million during
the 12 months ended December 31, 2011. The Company disposed of $27.8 million in
foreclosed assets and recognized subsequent write-downs totaling $5.0 million
for properties that were re-valued during the 12 months ended December 31,
2011. The carrying value of foreclosed assets was $62.6 million at December 31,
2011.
Fair Value Swap
.
During the first quarter of 2011, the Company entered into a stand-alone
derivative contract with the purchaser of its Visa Class B shares. The
valuation represents an internally developed estimate of the exposure based
upon probability-weighted potential Visa litigation losses and related carrying
cost obligations required under the contract.
101
Other Financial Instruments.
Many of the Companys assets and liabilities are short-term financial
instruments whose carrying values approximate fair value. These items include
Cash and Due From Banks, Interest Bearing Deposits with Other Banks, Federal
Funds Sold, Federal Funds Purchased, Securities Sold Under Repurchase
Agreements, and Short-Term Borrowings. In cases where quoted market prices are
not available, fair values are based on estimates using present value or other
valuation techniques. The resulting fair values may be significantly affected
by the assumptions used, including the discount rates and estimates of future
cash flows.
FASB ASC Topic
825 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 or non-recurring
basis. The methods and assumptions used to estimate the fair value of the
Companys other financial instruments are as follows:
Loans - The
loan portfolio is segregated into categories and the fair value of each loan
category is calculated using present value techniques based upon projected cash
flows and estimated discount rates that reflect the credit and interest rate
risks inherent in each loan category. The calculated present values are then
reduced by an allocation of the allowance for loan losses against each
respective loan category.
Deposits - The
fair value of Noninterest Bearing Deposits, NOW Accounts, Money Market Accounts
and Savings Accounts are the amounts payable on demand at the reporting date.
The fair value of fixed maturity certificates of deposit is estimated using
present value techniques and rates currently offered for deposits of similar
remaining maturities.
Subordinated
Notes Payable - The fair value of each note is calculated using present value
techniques, based upon projected cash flows and estimated discount rates as
well as rates being offered for similar obligations.
Long-Term
Borrowings - The fair value of each note is calculated using present value
techniques, based upon projected cash flows and estimated discount rates as
well as rates being offered for similar debt.
Commitments to
Extend Credit and Standby Letters of Credit - The fair value of commitments to
extend credit is estimated using the fees currently charged to enter into
similar agreements, taking into account the present creditworthiness of the
counterparties. The fair value of these fees is not material.
The Companys
financial instruments that have estimated fair values are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2011
|
|
2010
|
|
(Dollars in Thousands)
|
|
Carrying
Value
|
|
Estimated
Fair
Value
|
|
Carrying
Value
|
|
Estimated
Fair
Value
|
|
Financial
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
54,953
|
|
$
|
54,953
|
|
$
|
35,410
|
|
$
|
35,410
|
|
Short-Term
Investments
|
|
|
330,361
|
|
|
330,361
|
|
|
200,783
|
|
|
200,783
|
|
Investment
Securities
|
|
|
307,149
|
|
|
307,149
|
|
|
309,731
|
|
|
309,731
|
|
Loans, Net
of Allowance for Loan Losses
|
|
|
1,597,648
|
|
|
1,485,813
|
|
|
1,723,235
|
|
|
1,675,997
|
|
Total
Financial Assets
|
|
$
|
2,290,111
|
|
$
|
2,178,276
|
|
$
|
2,269,159
|
|
$
|
2,221,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
2,172,519
|
|
$
|
2,173,331
|
|
$
|
2,103,976
|
|
$
|
2,105,568
|
|
Short-Term
Borrowings
|
|
|
43,372
|
|
|
42,021
|
|
|
92,928
|
|
|
89,287
|
|
Subordinated
Notes Payable
|
|
|
62,887
|
|
|
62,858
|
|
|
62,887
|
|
|
62,884
|
|
Long-Term
Borrowings
|
|
|
44,606
|
|
|
47,770
|
|
|
50,101
|
|
|
52,302
|
|
Total
Financial Liabilities
|
|
$
|
2,323,384
|
|
$
|
2,325,980
|
|
$
|
2,309,892
|
|
$
|
2,310,041
|
|
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.
102
Note 20
PARENT COMPANY FINANCIAL INFORMATION
The operating
results of the parent company for the three years ended December 31 are shown
below:
Parent Company Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
OPERATING INCOME
|
|
|
|
|
|
|
|
|
|
|
Income Received from Subsidiary Bank:
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
$
|
|
|
$
|
|
|
$
|
35,000
|
|
Overhead Fees
|
|
|
3,364
|
|
|
3,059
|
|
|
3,209
|
|
Other Income
|
|
|
48
|
|
|
74
|
|
|
121
|
|
Total Operating Income
|
|
|
3,412
|
|
|
3,133
|
|
|
38,330
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSE
|
|
|
|
|
|
|
|
|
|
|
Salaries and Associate Benefits
|
|
|
1,974
|
|
|
1,359
|
|
|
1,694
|
|
Interest on Subordinated Notes Payable
|
|
|
1,380
|
|
|
2,008
|
|
|
3,730
|
|
Professional Fees
|
|
|
1,251
|
|
|
1,185
|
|
|
999
|
|
Advertising
|
|
|
135
|
|
|
96
|
|
|
202
|
|
Legal Fees
|
|
|
249
|
|
|
226
|
|
|
176
|
|
Other
|
|
|
440
|
|
|
623
|
|
|
813
|
|
Total Operating Expense
|
|
|
5,429
|
|
|
5,497
|
|
|
7,614
|
|
Income Before Income Taxes and Equity in
Undistributed Earnings of Subsidiary Bank
|
|
|
(2,017
|
)
|
|
(2,364
|
)
|
|
30,716
|
|
Income Tax Benefit
|
|
|
(666
|
)
|
|
(771
|
)
|
|
(1,430
|
)
|
Income Before Equity in Undistributed
Earnings of Subsidiary Bank
|
|
|
(1,351
|
)
|
|
(1,593
|
)
|
|
32,146
|
|
Equity in Undistributed Earnings of
Subsidiary Bank
|
|
|
6,248
|
|
|
1,180
|
|
|
(35,617
|
)
|
Net Income (Loss)
|
|
$
|
4,897
|
|
$
|
(413
|
)
|
$
|
(3,471
|
)
|
The following
are condensed statements of financial condition of the parent company at
December 31:
Parent Company Statements of Financial
Condition
|
|
|
|
|
|
|
|
(Dollars in Thousands, Except Per Share Data)
|
|
2011
|
|
2010
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash and Due From Subsidiary Bank
|
|
$
|
6,269
|
|
$
|
10,986
|
|
Investment in Subsidiary Bank
|
|
|
313,372
|
|
|
314,874
|
|
Other Assets
|
|
|
3,016
|
|
|
2,693
|
|
Total Assets
|
|
$
|
322,657
|
|
$
|
328,553
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Subordinated Notes Payable
|
|
$
|
62,887
|
|
$
|
62,887
|
|
Other Liabilities
|
|
|
7,828
|
|
|
6,647
|
|
Total Liabilities
|
|
|
70,715
|
|
|
69,534
|
|
|
|
|
|
|
|
|
|
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; 17,160,274 and 17,100,081 shares issued and outstanding at
December 31, 2011 and December 31, 2010, respectively
|
|
|
172
|
|
|
171
|
|
Additional Paid-In Capital
|
|
|
37,838
|
|
|
36,920
|
|
Retained Earnings
|
|
|
237,461
|
|
|
237,679
|
|
Accumulated Other Comprehensive Loss, Net
of Tax
|
|
|
(23,529
|
)
|
|
(15,751
|
)
|
Total Shareowners Equity
|
|
|
251,942
|
|
|
259,019
|
|
Total Liabilities and Shareowners Equity
|
|
$
|
322,657
|
|
$
|
328,553
|
|
103
The cash flows
for the parent company for the three years ended December 31 were as follows:
Parent Company Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
4,897
|
|
$
|
(413
|
)
|
$
|
(3,471
|
)
|
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Equity in Undistributed Earnings of
Subsidiary Bank
|
|
|
(6,248
|
)
|
|
(1,180
|
)
|
|
35,617
|
|
Increase in Other Assets
|
|
|
(324
|
)
|
|
(97
|
)
|
|
(528
|
)
|
Increase in Other Liabilities
|
|
|
1,182
|
|
|
(203
|
)
|
|
1,325
|
|
Net Cash (Used In) Provided by Operating
Activities
|
|
|
(493
|
)
|
|
(1,893
|
)
|
|
32,943
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Payment of Dividends
|
|
|
(5,142
|
)
|
|
(8,368
|
)
|
|
(12,959
|
)
|
Repurchase of Common Stock
|
|
|
|
|
|
|
|
|
(1,561
|
)
|
Issuance of Common Stock
|
|
|
918
|
|
|
822
|
|
|
1,052
|
|
Net Cash Used in Financing Activities
|
|
|
(4,224
|
)
|
|
(7,546
|
)
|
|
(13,468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash
|
|
|
(4,717
|
)
|
|
(9,439
|
)
|
|
19,475
|
|
Cash at Beginning of Period
|
|
|
10,986
|
|
|
20,425
|
|
|
950
|
|
Cash at End of Period
|
|
$
|
6,269
|
|
$
|
10,986
|
|
$
|
20,425
|
|
Note 21
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. Total comprehensive income is reported
in the consolidated statements of changes in shareowners equity. Information
related to net comprehensive income (loss) is as follows:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2011
|
|
2010
|
|
2009
|
|
Other
Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
Change in net unrealized gain, net of tax
expense of $203 and $41 and a net of tax benefit of $460
|
|
$
|
397
|
|
$
|
79
|
|
$
|
(888
|
)
|
Retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Change in funded status of defined benefit
pension plan and SERP, net of tax benefit of $5,135, $627, and a net of tax
expense $4,441
|
|
|
(8,175
|
)
|
|
(1,000
|
)
|
|
7,072
|
|
Net Other Comprehensive (Loss) Gain
|
|
$
|
(7,778
|
)
|
$
|
(921
|
)
|
$
|
6,184
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other
comprehensive loss, net of tax, as of year-end were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain on securities available
for sale
|
|
$
|
1,064
|
|
$
|
667
|
|
$
|
588
|
|
Net unfunded liability for defined benefit
pension plan and SERP
|
|
|
(24,593
|
)
|
|
(16,418
|
)
|
|
(15,418
|
)
|
|
|
$
|
(23,529
|
)
|
$
|
(15,751
|
)
|
$
|
(14,830
|
)
|
104
|
|
Item 9.
|
Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
|
|
|
None.
|
|
|
Item 9A.
|
Controls and Procedures
|
Evaluation of
Disclosure Controls and Procedures
. As of December 31, 2011, the end of the
period covered by this Annual Report on Form 10-K, our management, including
our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934). Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer each
concluded that as of December 31, 2011, the end of the period covered by this
Annual Report on Form 10-K, we maintained effective disclosure controls and
procedures.
Managements
Report on Internal Control Over Financial Reporting
. Our management is
responsible for establishing and maintaining effective internal control over
financial reporting. Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with U.S. generally accepted accounting principles.
Under the
supervision and with the participation of management, including the Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of
the effectiveness of internal control over financial reporting based on the
framework in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation
under the framework in Internal Control - Integrated Framework, our management
has concluded we maintained effective internal control over financial
reporting, as such term is defined in Securities Exchange Act of 1934 Rule
13a-15(f), as of December 31, 2011.
Internal
control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent limitations. Internal
control over financial reporting is a process that involves human diligence and
compliance and is subject to lapses in judgment and breakdowns resulting from
human failures. Internal control over financial reporting can also be
circumvented by collusion or improper management override. Because of such
limitations, there is a risk that material misstatements may not be prevented
or detected on a timely basis by internal control over financial reporting.
However, these inherent limitations are known features of the financial
reporting process. Therefore, it is possible to design into the process
safeguards to reduce, though not eliminate, this risk.
Management is
also responsible for the preparation and fair presentation of the consolidated
financial statements and other financial information contained in this report.
The accompanying consolidated financial statements were prepared in conformity
with U.S. generally accepted accounting principles and include, as necessary,
best estimates and judgments by management.
Ernst &
Young LLP, an independent registered public accounting firm, has audited our
consolidated financial statements as of and for the year ended December 31,
2011, and opined as to the effectiveness of internal control over financial
reporting as of December 31, 2011, as stated in its attestation report, which
is included herein on page 106.
Change in Internal Control
.
Our management, including the Chief Executive Officer and Chief Financial
Officer, has reviewed our internal control. There have been no significant
changes in our internal control during our most recently completed fiscal
quarter that materially affected, or is likely to materially affect our
internal control over financial reporting.
|
|
I
tem 9B.
|
Other Information
|
|
|
None.
|
105
Report of Independent Registered Public
Accounting Firm
The Board of
Directors and Shareowners of
Capital City Bank Group, Inc.
We have
audited Capital City Bank Group, Inc.s internal control over financial
reporting as of December 31, 2011, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Capital City Bank
Group, Inc.s management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness
of internal control over financial reporting included in the accompanying
Report of Management on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the companys internal control over
financial reporting based on our audit.
We conducted
our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A companys
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A companys internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the companys assets that could have a material effect on the financial
statements.
Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our
opinion, Capital City Bank Group, Inc. maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2011,
based on the COSO criteria.
We also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated statements of financial
condition of Capital City Bank Group, Inc. as of December 31, 2011 and 2010,
and the related consolidated statements of operations, changes in shareowners
equity, and cash flows for each of the three years in the period ended December
31, 2011 of Capital City Bank Group, Inc. and our report dated March 15, 2012
expressed an unqualified opinion thereon.
|
/s/ Ernst & Young LLP
|
|
|
|
|
Birmingham, Alabama
|
|
March 15, 2012
|
|
106
P
art III
|
|
I
tem 10.
|
Directors, Executive Officers, and
Corporate Governance
|
|
|
Incorporated
herein by reference to the subsection entitled Codes of Conduct and Ethics
under the section entitled Corporate Governance, Nominees for Election as
Directors, Continuing Directors and Executive Officers, Share Ownership
and the subsection entitled Committees of the Board under the section
Board and Committee Membership in the Registrants Proxy Statement relating
to its Annual Meeting of Shareowners to be held April 24, 2012.
|
|
|
I
tem 11.
|
Executive Compensation
|
|
|
Incorporated
herein by reference to the sections entitled Executive Compensation and
Director Compensation in the Registrants Proxy Statement relating to its
Annual Meeting of Shareowners to be held April 24, 2012.
|
|
|
I
tem 12.
|
Security Ownership of Certain Beneficial
Owners and Management and Related Shareowners Matters
|
The 2011
Associate Incentive Plan, 2011 Associate Stock Purchase Plan, and 2011 Director
Stock Purchase Plan were approved by the Registrants shareowners. The
following table provides certain information regarding the Registrants equity
compensation plans.
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of securities to be
issued upon exercise of
outstanding options, warrants
and
rights
|
|
Weighted-average exercise
price
of outstanding options,
warrants and rights
|
|
Number of securities remaining
available
for future issuance under equity
compensation plans (excluding
securities reflected in column (a))
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
Equity
Compensation Plans
Approved by Securities
Holders
|
|
60,384
|
(1)
|
|
$32.79
|
|
|
1,585,814
|
(2)
|
Equity
Compensation Plans Not
Approved by Securities
Holders
|
|
|
|
|
|
|
|
|
|
Total
|
|
60,384
|
|
|
$32.79
|
|
|
1,585,8144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes
60,384 shares that may be issued upon exercise of outstanding options under
the terminated 1996 Associate Incentive Plan.
|
|
|
(2)
|
Consists of
875,000 shares available for issuance under our 2011 Associate Incentive
Plan, 573,926 shares available for issuance under our 2011 Associate Stock
Purchase Plan, and 136,888 shares available for issuance under our 2011
Director Stock Purchase Plan. Of these plans, the only plan under which
options may be granted in the future is our 2011 Associate Incentive Plan.
|
The other
information required by Item 12 of Form 10-K is incorporated by reference from
the information contained in the section captioned Share Ownership in the
Registrants Proxy Statement relating to its Annual Meeting of Shareowners to
be held April 24, 2012.
|
|
I
tem 13.
|
Certain Relationships and Related
Transactions, and Director Independence
|
Incorporated
herein by reference to the subsections entitled Related Person Transaction
Policy and Transactions With Related Persons under the section entitled
Executive Officers and Transactions with Related Persons and the subsection
entitled Independent Directors under the section entitled Corporate
Governance in the Registrants Proxy Statement relating to its Annual Meeting
of Shareowners to be held April 24, 2012.
|
|
I
tem 14.
|
Principal Accountant Fees and Services
|
Incorporated herein by
reference to the section entitled Audit Fees and Related Matters in the
Registrants Proxy Statement relating to its Annual Meeting of Shareowners to
be held April 24, 2012.
107
|
|
P
ART IV
|
|
|
|
I
tem 15.
|
Exhibits and Financial Statement Schedules
|
|
|
|
|
The
following documents are filed as part of this report
|
|
|
|
|
|
1.
|
Financial
Statements
|
|
|
|
|
|
|
Reports of
Independent Registered Public Accounting Firm
|
|
|
Consolidated
Statements of Financial Condition at the End of Fiscal Years 2011 and 2010
|
|
|
Consolidated
Statements of Operations for Fiscal Years 2011, 2010, and 2009
|
|
|
Consolidated
Statements of Changes in Shareowners Equity for Fiscal Years 2011, 2010, and
2009
|
|
|
Consolidated
Statements of Cash Flows for Fiscal Years 2011, 2010, and 2009
|
|
|
Notes to
Consolidated Financial Statements
|
|
|
|
|
|
2.
|
Financial
Statement Schedules
|
|
|
|
|
|
Other
schedules and exhibits are omitted because the required information either is
not applicable or is shown in the financial statements or the notes thereto.
|
|
|
|
|
3.
|
Exhibits
Required to be Filed by Item 601 of Regulation S-K
|
|
|
|
|
|
|
|
|
Reg. S-K
Exhibit
Table
Item No.
|
|
Description
of Exhibit
|
|
|
|
|
|
|
|
3.1
|
|
Amended and
Restated Articles of Incorporation - incorporated herein by reference to
Exhibit 3 of the Registrants 1996 Proxy Statement (filed 4/11/96) (No.
0-13358).
|
|
|
|
|
|
|
|
3.2
|
|
Amended and
Restated Bylaws - incorporated herein by reference to Exhibit 3.2 of the
Registrants Form 8-K (filed 11/30/07) (No. 0-13358).
|
|
|
|
|
|
|
|
4.1
|
|
See Exhibits
3.1, and 3.2 for provisions of Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws, which define the rights of its shareholders.
|
|
|
|
|
|
|
|
4.2
|
|
Capital City
Bank Group, Inc. 2011 Director Stock Purchase Plan - incorporated herein by
reference to Exhibit 10.2 of the Registrants Form 8-K (filed 5/2/11) (No.
0-13358).
|
|
|
|
|
|
|
|
4.3
|
|
Capital City
Bank Group, Inc. 2011 Associate Stock Purchase Plan - incorporated herein by
reference to Exhibit 10.1 of the Registrants Form 8-K (filed 5/2/11) (No.
0-13358).
|
|
|
|
|
|
|
|
4.4
|
|
Capital City
Bank Group, Inc. 2011 Associate Incentive Plan - incorporated herein by
reference to Exhibit 10.3 of the Registrants Form 8-K (filed 5/2/11) (No.
0-13358).
|
|
|
|
|
|
|
|
4.5
|
|
In
accordance with Regulation S-K, Item 601(b)(4)(iii)(A) certain instruments
defining the rights of holders of long-term debt of Capital City Bank Group,
Inc. not exceeding 10% of the total assets of Capital City Bank Group, Inc.
and its consolidated subsidiaries have been omitted; the Registrant agrees to
furnish a copy of any such instruments to the Commission upon request.
|
|
|
|
|
|
|
|
10.1
|
|
Capital City
Bank Group, Inc. 1996 Dividend Reinvestment and Optional Stock Purchase Plan
- incorporated herein by reference to Exhibit 10 of the Registrants Form S-3
(filed 01/30/97) (No. 333-20683).
|
|
|
|
|
|
|
|
10.2
|
|
Capital City
Bank Group, Inc. Supplemental Executive Retirement Plan - incorporated herein
by reference to Exhibit 10(d) of the Registrants Form 10-K (filed 3/27/03)
(No. 0-13358).
|
|
|
|
|
|
|
|
10.3
|
|
Capital City
Bank Group, Inc. 401(k) Profit Sharing Plan incorporated herein by
reference to Exhibit 4.3 of Registrants Form S-8 (filed 09/30/97) (No.
333-36693).
|
108
|
|
|
|
|
|
|
10.4
|
|
2005 Stock
Option Agreement by and between Capital City Bank Group, Inc. and William G.
Smith, Jr., dated March 24, 2005 incorporated herein by reference to
Exhibit 10.1 of the Registrants Form 8-K (filed 3/31/05) (No. 0-13358).
|
|
|
|
|
|
|
|
10.5
|
|
2006 Stock
Option Agreement by and between Capital City Bank Group, Inc. and William G.
Smith, Jr., dated March 23, 2006 incorporated herein by reference to
Exhibit 10.1 of the Registrants Form 8-K (filed 3/29/06) (No. 0-13358).
|
|
|
|
|
|
|
|
10.6
|
|
Capital City
Bank Group, Inc. Non-Employee Director Plan, as amended incorporated herein
by reference to Exhibit 10.2 of the Registrants Form 8-K (filed 3/29/06)
(No. 0-13358).
|
|
|
|
|
|
|
|
10.7
|
|
Form of
Participant Agreement for the Capital City Bank Group, Inc. Long-Term
Incentive Plan incorporated herein by reference to Exhibit 10.1 of the
Registrants Form 10-Q (filed 8/10/06) (No. 0-13358).
|
|
|
|
|
|
|
|
10.8
|
|
Form of
Participant Agreement for 2008 Stock-Based Incentive Plan incorporated
herein by reference to Exhibit 10.1 of the Registrants Form 8-K (filed
6/5/08) (No. 0-13358).
|
|
|
|
|
|
|
|
10.9
|
|
Form of
Participant Agreement for 2009 Stock-Based Incentive Plan incorporated
herein by reference to Exhibit 10.1 of the Registrants Form 8-K (filed
6/30/09) (No. 0-13358).
|
|
|
|
|
|
|
|
11
|
|
Statement re
Computation of Per Share Earnings.*
|
|
|
|
|
|
|
|
14
|
|
Capital City
Bank Group, Inc. Code of Ethics for the Chief Financial Officer and Senior
Financial Officers - incorporated herein by reference to Exhibit 14 of the Registrants
Form 8-K (filed 3/11/05) (No. 0-13358).
|
|
|
|
|
|
|
|
21
|
|
Capital City
Bank Group, Inc. Subsidiaries incorporated herein by reference to Exhibit
21 of the Registrants Form 10-K (filed 3/13/09) (No. 0-13358).
|
|
|
|
|
|
|
|
23.1
|
|
Consent of
Independent Registered Public Accounting Firm.**
|
|
|
|
|
|
|
|
31.1
|
|
Certification
of CEO pursuant to Securities and Exchange Act Section 302 of the
Sarbanes-Oxley Act of 2002.**
|
|
|
|
|
|
|
|
31.2
|
|
Certification
of CFO pursuant to Securities and Exchange Act Section 302 of the
Sarbanes-Oxley Act of 2002.**
|
|
|
|
|
|
|
|
32.1
|
|
Certification
of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.**
|
|
|
|
|
|
|
|
32.2
|
|
Certification
of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.**
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL
Instance Document
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
|
*
|
Information
required to be presented in Exhibit 11 is provided in Note 13 to the
consolidated financial statements under Part II, Item 8 of this Form 10-K in
accordance with the provisions of U.S. generally accepted accounting
principles.
|
|
|
**
|
Filed
electronically herewith.
|
109
S
ignatures
Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on March 15, 2012, on
its behalf by the undersigned, thereunto duly authorized.
|
|
CAPITAL CITY
BANK GROUP, INC.
|
|
|
|
/s/ William
G. Smith, Jr.
|
|
William G.
Smith, Jr.
|
|
Chairman,
President and Chief Executive Officer
|
(Principal
Executive Officer)
|
|
|
|
Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed on March 15, 2012 by the following persons in the capacities
indicated.
|
|
/s/ William
G. Smith, Jr.
|
|
William G.
Smith, Jr.
|
|
Chairman, President
and Chief Executive Officer
|
(Principal
Executive Officer)
|
|
|
|
/s/ J.
Kimbrough Davis
|
|
J. Kimbrough
Davis
|
|
Executive
Vice President and Chief Financial Officer
|
(Principal
Financial and Accounting Officer)
|
110
Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on March 15, 2012, on
its behalf by the undersigned, thereunto duly authorized.
|
|
|
Directors:
|
|
|
|
|
|
/s/ DuBose
Ausley
|
|
/s/ John K.
Humphress
|
DuBose
Ausley
|
|
John K.
Humphress
|
|
|
|
/s/ Thomas
A. Barron
|
|
/s/ Lina S.
Knox
|
Thomas A.
Barron
|
|
Lina S. Knox
|
|
|
|
/s/ Frederick
Carroll, III
|
|
/s/ Henry
Lewis III
|
Frederick
Carroll, III
|
|
Henry Lewis
III
|
|
|
|
/s/ Cader B.
Cox, III
|
|
/s/ William
G. Smith, Jr.
|
Cader B.
Cox, III
|
|
William G.
Smith, Jr.
|
|
|
|
/s/ J.
Everitt Drew
|
|
|
J. Everitt
Drew
|
|
|
111
Exhibit Index
|
|
|
|
|
|
|
|
Reg. S-K
Exhibit
Table
Item No.
|
|
Description
of Exhibit
|
|
|
|
|
|
|
|
3.1
|
|
Amended and
Restated Articles of Incorporation - incorporated herein by reference to
Exhibit 3 of the Registrants 1996 Proxy Statement (filed 4/11/96) (No.
0-13358).
|
|
|
|
|
|
|
|
3.2
|
|
Amended and
Restated Bylaws - incorporated herein by reference to Exhibit 3.2 of the
Registrants Form 8-K (filed 11/30/07) (No. 0-13358).
|
|
|
|
|
|
|
|
4.1
|
|
See Exhibits
3.1, and 3.2 for provisions of Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws, which define the rights of its shareholders.
|
|
|
|
|
|
|
|
4.2
|
|
Capital City
Bank Group, Inc. 2011 Director Stock Purchase Plan - incorporated herein by
reference to Exhibit 10.2 of the Registrants Form 8-K (filed 5/2/11) (No.
0-13358).
|
|
|
|
|
|
|
|
4.3
|
|
Capital City
Bank Group, Inc. 2011 Associate Stock Purchase Plan - incorporated herein by
reference to Exhibit 10.1 of the Registrants Form 8-K (filed 5/2/11) (No.
0-13358).
|
|
|
|
|
|
|
|
4.4
|
|
Capital City
Bank Group, Inc. 2011 Associate Incentive Plan - incorporated herein by
reference to Exhibit 10.3 of the Registrants Form 8-K (filed 5/2/11) (No.
0-13358).
|
|
|
|
|
|
|
|
4.5
|
|
In
accordance with Regulation S-K, Item 601(b)(4)(iii)(A) certain instruments
defining the rights of holders of long-term debt of Capital City Bank Group,
Inc. not exceeding 10% of the total assets of Capital City Bank Group, Inc.
and its consolidated subsidiaries have been omitted; the Registrant agrees to
furnish a copy of any such instruments to the Commission upon request.
|
|
|
|
|
|
|
|
10.1
|
|
Capital City
Bank Group, Inc. 1996 Dividend Reinvestment and Optional Stock Purchase Plan
- incorporated herein by reference to Exhibit 10 of the Registrants Form S-3
(filed 01/30/97) (No. 333-20683).
|
|
|
|
|
|
|
|
10.2
|
|
Capital City
Bank Group, Inc. Supplemental Executive Retirement Plan - incorporated herein
by reference to Exhibit 10(d) of the Registrants Form 10-K (filed 3/27/03)
(No. 0-13358).
|
|
|
|
|
|
|
|
10.3
|
|
Capital City
Bank Group, Inc. 401(k) Profit Sharing Plan incorporated herein by
reference to Exhibit 4.3 of Registrants Form S-8 (filed 09/30/97) (No.
333-36693).
|
|
|
|
|
|
|
|
10.4
|
|
2005 Stock
Option Agreement by and between Capital City Bank Group, Inc. and William G.
Smith, Jr., dated March 24, 2005 incorporated herein by reference to
Exhibit 10.1 of the Registrants Form 8-K (filed 3/31/05) (No. 0-13358).
|
|
|
|
|
|
|
|
10.5
|
|
2006 Stock
Option Agreement by and between Capital City Bank Group, Inc. and William G.
Smith, Jr., dated March 23, 2006 incorporated herein by reference to
Exhibit 10.1 of the Registrants Form 8-K (filed 3/29/06) (No. 0-13358).
|
|
|
|
|
|
|
|
10.6
|
|
Capital City
Bank Group, Inc. Non-Employee Director Plan, as amended incorporated herein
by reference to Exhibit 10.2 of the Registrants Form 8-K (filed 3/29/06)
(No. 0-13358).
|
|
|
|
|
|
|
|
10.7
|
|
Form of
Participant Agreement for the Capital City Bank Group, Inc. Long-Term
Incentive Plan incorporated herein by reference to Exhibit 10.1 of the
Registrants Form 10-Q (filed 8/10/06) (No. 0-13358).
|
|
|
|
|
|
|
|
10.8
|
|
Form of
Participant Agreement for 2008 Stock-Based Incentive Plan incorporated
herein by reference to Exhibit 10.1 of the Registrants Form 8-K (filed
6/5/08) (No. 0-13358).
|
112
|
|
|
|
|
|
|
10.9
|
|
Form of
Participant Agreement for 2009 Stock-Based Incentive Plan incorporated
herein by reference to Exhibit 10.1 of the Registrants Form 8-K (filed
6/30/09) (No. 0-13358).
|
|
|
|
|
|
|
|
11
|
|
Statement re
Computation of Per Share Earnings.*
|
|
|
|
|
|
|
|
14
|
|
Capital City
Bank Group, Inc. Code of Ethics for the Chief Financial Officer and Senior
Financial Officers - incorporated herein by reference to Exhibit 14 of the
Registrants Form 8-K (filed 3/11/05) (No. 0-13358).
|
|
|
|
|
|
|
|
21
|
|
Capital City
Bank Group, Inc. Subsidiaries incorporated herein by reference to Exhibit
21 of the Registrants Form 10-K (filed 3/13/09) (No. 0-13358).
|
|
|
|
|
|
|
|
23.1
|
|
Consent of
Independent Registered Public Accounting Firm.**
|
|
|
|
|
|
|
|
31.1
|
|
Certification
of CEO pursuant to Securities and Exchange Act Section 302 of the
Sarbanes-Oxley Act of 2002.**
|
|
|
|
|
|
|
|
31.2
|
|
Certification
of CFO pursuant to Securities and Exchange Act Section 302 of the
Sarbanes-Oxley Act of 2002.**
|
|
|
|
|
|
|
|
32.1
|
|
Certification
of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.**
|
|
|
|
|
|
|
|
32.2
|
|
Certification
of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.**
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL
Instance Document
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy
Extension Definition Linkbase Document
|
|
|
*
|
Information
required to be presented in Exhibit 11 is provided in Note 13 to the
consolidated financial statements under Part II, Item 8 of this Form 10-K in
accordance with the provisions of U.S. generally accepted accounting
principles.
|
|
|
**
|
Filed
electronically herewith.
|
113
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