Capital City Bank Group, Inc. Reports Second Quarter 2014 Results

GlobeNewswire

TALLAHASSEE, Fla., July 22, 2014 (GLOBE NEWSWIRE) -- Capital City Bank Group, Inc. (CCBG) today reported net income of $1.5 million, or $0.08 per diluted share for the second quarter of 2014 compared to net income of $3.8 million, or $0.22 per diluted share for the first quarter of 2014, and $0.8 million, or $0.05 per diluted share, for the second quarter of 2013. For the first six months of 2014, the Company reported net income of $5.2 million, or $0.30 per diluted share, compared to net income of $1.7 million, or $0.10 per diluted share for the same period in 2013.

Compared to the first quarter of 2014, performance reflects higher noninterest income of $0.6 million and net interest income of $0.1 million that was offset by increases in noninterest expense of $0.7 million, loan loss provision of $0.2 million, and income taxes of $2.1 million.

Compared to the second quarter of 2013, the increase in earnings was due to a lower loan loss provision of $1.0 million and a $1.4 million decrease in noninterest expense, partially offset by lower net interest income of $1.1 million, noninterest income of $0.4 million, and higher income taxes of $0.2 million.

The increase in earnings for the first six months of 2014 versus the comparable period in 2013 was attributable to lower noninterest expense of $4.1 million, a lower loan loss provision of $1.7 million, and lower income taxes of $1.6 million, partially offset by lower net interest income of $2.8 million and noninterest income of $1.1 million.

"Capital City posted solid performance in the second quarter, and our year-to-date numbers are strong," said William G. Smith, Jr., Chairman, President, and CEO of Capital City Bank Group. "Quarter over quarter, nonperforming assets fell 13.2% and, while it is too early to suggest the loan portfolio has stabilized, it was encouraging to report growth for the second consecutive quarter. Loan growth coupled with additions to our investment portfolio helped stabilize our net interest margin quarter over quarter. Our retail approach to disposing of ORE properties continues to produce positive results. In fact, second quarter ORE sales totaled $8.6 million -- our second best quarter to date. Improving our credit quality and stabilizing our loan portfolio remain primary areas of focus in our 2014 strategy, as will continued efforts to right-size our expense base and identify new revenue opportunities. The economic outlook continues to brighten, though the pace of improvement is slow. There is still work to be done, but I am proud of our accomplishments and like our momentum coming out of the first half of 2014."

The Return on Average Assets was 0.23% and the Return on Average Equity was 2.09% for the second quarter of 2014. These metrics were 0.59% and 5.44% for the first quarter of 2014, and 0.13% and 1.35% for the second quarter of 2013, respectively.

For the first six months of 2014, the Return on Average Assets was 0.41% and the Return on Average Equity was 3.75% compared to 0.13% and 1.36%, respectively, for the first half of 2013.

Discussion of Financial Condition

Average earning assets were $2.261 billion for the second quarter of 2014, a decrease of $7.4 million, or 0.3%, from the first quarter of 2014 and an increase of $54.6 million, or 2.5%, over the fourth quarter of 2013. The change in earning assets from the first quarter of 2014 reflects a lower level of public fund deposits and problem loan resolution. The increase compared to the fourth quarter of 2013 reflects a higher level of investments and loans, which as funded through growth in deposits.

We maintained an average net overnight funds (deposits with banks plus fed funds sold less fed funds purchased) sold position of $408.7 million during the second quarter of 2014 compared to an average net overnight funds sold position of $467.3 million in the first quarter of 2014 and an average overnight funds sold position of $411.6 million in the fourth quarter of 2013. The lower balance when compared to the first quarter of 2014 primarily reflects higher loan and investment portfolios, and the lower level of public funds. The decrease when compared to the fourth quarter of 2013 reflects an increase in the investment portfolio partially offset by a higher level of public funds.

Slow economic growth and deleveraging by our clients has generated a historically high level of liquidity, which, given the current operating environment, is difficult to profitably deploy without taking inordinate risks. Although we have experienced loan growth in the first half of 2014, where practical, we continue to work to lower the level of overnight funds by adding to our investment portfolio with short-duration, high quality securities and reducing deposit balances. We continue to offer to our clients a fully-insured money market account which is provided by a third party and can serve as an alternative investment for some of our higher balance depositors while at the same time allowing us to maintain the account relationship. Until such time that attractive investment alternatives arise, we will continue to execute these strategies as well as seek other initiatives in an effort to lower our overnight fund balances.

Period end loans increased in each of the last two quarters and, when compared to the first quarter of 2014, average loans increased by $16.5 million, or 1.2%, which represents the first quarter-over-quarter increase in average loans since 2009. The improvement in loans was experienced primarily in the consumer and commercial portfolios. The growth was a result of both an increase in production (which has increased in five of the last six quarters) as well as lower payoffs. Average loans declined by $3.0 million when compared to the fourth quarter of 2013, primarily attributable to lower commercial real estate, which was partially offset by growth in the consumer loan portfolio.

Without compromising our credit standards or taking on inordinate interest rate risk, we have modified several lending programs in our business, commercial real estate and consumer portfolios to try to mitigate the significant impact that consumer and business deleveraging is having on our portfolio. These programs have helped to increase overall production.

Nonperforming assets (nonaccrual loans and OREO) totaled $68.2 million at the end of the second quarter of 2014, a decrease of $10.3 million from the first quarter of 2014 and $16.8 million from the fourth quarter of 2013. Nonaccrual loans totaled $25.7 million at the end of the second quarter of 2014, a decrease of $8.9 million from the first quarter of 2014 and $11.3 million from the fourth quarter of 2013. Nonaccrual loan additions totaled $4.4 million in the second quarter of 2014 and $11.9 million for the first six months of 2014, which compares to $18.5 million for the same period of 2013. The balance of OREO totaled $42.6 million at the end of the second quarter of 2014, representing decreases of $1.5 million from the first quarter of 2014 and $5.5 million from the fourth quarter of 2013. For the second quarter of 2014, we added properties totaling $8.0 million, sold properties totaling $8.6 million, and recorded valuation adjustments totaling $0.8 million. For the first six months of 2014, we have added properties totaling $9.3 million, sold properties totaling $13.2 million, and recorded valuation adjustments totaling $1.6 million. Nonperforming assets represented 2.66% of total assets at June 30, 2014 compared to 2.98% at March 31, 2014 and 3.26% at December 31, 2013.

Average total deposits were $2.110 billion for the second quarter of 2014, a decrease of $15.4 million, or 0.7%, from the first quarter of 2014 and an increase of $58.7 million, or 2.9%, over the fourth quarter of 2013. The decrease in deposits when compared to the first quarter of 2014 resulted primarily from the reduction in the level of public funds and certificates of deposit. When compared to the fourth quarter of 2013, the increase was a result of higher public funds, noninterest bearing demand and savings accounts, partially offset by lower certificates of deposit and regular NOWs.

Deposit levels remain strong and our mix of deposits continues to improve as higher cost certificates of deposit are replaced with lower rate non-maturity deposits and noninterest bearing demand accounts. Prudent pricing discipline will continue to be the key to managing our mix of deposits. Therefore, we do not attempt to compete with higher rate paying competitors for deposits.

Average borrowings when compared to the first quarter of 2014 and fourth quarter of 2013 decreased by $5.3 million and $19.8 million, respectively, resulting from payoff/amortization of FHLB advances and lower repurchase agreement balances.

Discussion of Operating Results

Tax equivalent net interest income for the second quarter of 2014 was $18.6 million compared to $18.4 million for the first quarter of 2014 and $19.7 million for the second quarter of 2013. The increase in tax equivalent net interest income compared to the first quarter of 2014 reflects one additional calendar day, a positive shift in earning asset mix due to growth in the investment and loan portfolios and a reduction in interest expense, partially offset by unfavorable asset repricing. The lower net interest income when compared to the second quarter of 2013 reflects a reduction in loan income primarily attributable to declining loan balances and unfavorable asset repricing, partially offset by a reduction in interest expense and a lower level of foregone interest on loans. For the six months ended June 30, 2014, tax equivalent net interest income totaled $37.0 million compared to $39.8 million for the same period of 2013.

Although the company experienced higher net interest income for the quarter, pressure still remains on net interest income primarily as a result of the low rate environment. The low rate environment remains favorable to the repricing of deposits, but continues to negatively impact the loan and investment portfolios. Increased lending competition in all markets has also unfavorably impacted the pricing for loans.

Although the impact will be minimal, we will continue our efforts to lower our cost of funds, to the extent we can, and shift the mix of our deposits to help mitigate the unfavorable impact of soft loan demand and unfavorable repricing.

The net interest margin for the second quarter of 2014 at 3.29% was equal to the first quarter of 2014 and represented a decline of 30 basis points from the second quarter of 2013. Growth in our investment and loan portfolios helped to maintain our margin from the first to second quarter, while the decrease in the margin from the comparable prior year period 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 second quarter of 2014 was $0.5 million compared to $0.3 million for the first quarter of 2014 and $1.5 million for the second quarter of 2013. For the first half of 2014, the loan loss provision totaled $0.8 million compared to $2.5 million for the same period of 2013. The lower level of provision reflects continued favorable problem loan migration and improvement in key credit metrics. Net charge-offs for the second quarter of 2014 totaled $2.1 million, or 0.59% (annualized), of average loans compared to $1.3 million, or 0.39% (annualized), for the first quarter of 2014 and $2.0 million, or 0.54% (annualized), for the second quarter of 2013. For the first half of 2014, net charge-offs totaled $3.4 million, or 0.49% (annualized), of average loans compared to $4.4 million, or 0.60%, for the same period of 2013. At quarter-end, the allowance for loan losses of $20.5 million was 1.45% of outstanding loans (net of overdrafts) and provided coverage of 80% of nonperforming loans compared to 1.57% and 64%, respectively, at March 31, 2014 and 1.65% and 62%, respectively, at December 31, 2013.

Noninterest income for the second quarter of 2014 totaled $13.3 million, an increase of $0.6 million, or 4.4%, over the first quarter of 2014 and a decrease of $0.4 million, or 2.8%, from the second quarter of 2013. The increase over the first quarter of 2014 reflects higher deposit fees of $0.3 million, bank card fees of $0.1 million, mortgage banking fees of $0.1 million, and other income of $0.2 million, partially offset by lower wealth management fees of $0.1 million. Higher overdraft fees and account maintenance fees drove the increase in deposit fees. Bank card fees increased due to higher card spend. The increase in mortgage banking fees was attributable to higher new loan production reflective of a seasonal pickup in home purchase activity as well as a higher margin on sold loans. A higher level of miscellaneous recoveries drove the increase in other income. Compared to the second quarter of 2013, the decrease was primarily due to decreases in data processing fees of $0.3 million and mortgage banking fees of $0.2 million that were partially offset by higher other income of $0.1 million. Data processing fees declined due to a lower level of fees from a government processing contract that ended early in the second quarter of 2014. A lower level of refinancing activity drove the reduction in mortgage banking fees. A higher level of miscellaneous recoveries drove the increase in other income.

For the first half of 2014, noninterest income totaled $26.1 million, a $1.1 million decrease from the same period of 2013 reflective of lower deposit fees of $0.3 million, mortgage banking fees of $0.6 million, and data processing fees of $0.4 million, partially offset by higher bank card fees of $0.1 million and other income of $0.1 million. The decrease in deposit fees was due to a lower level of overdraft fees generally reflective of improved financial management by our clients. A lower level of refinancing activity drove the reduction in mortgage banking fees. Data processing fees declined due to the aforementioned government processing contract that ended during the second quarter of 2014. Higher card spend drove the increase in bank card fees.

A higher level of miscellaneous recoveries drove the increase in other income.

Noninterest expense for the second quarter of 2014 totaled $29.1 million, an increase of $0.7 million, or 2.5%, over the first quarter of 2014 reflective of higher OREO expense of $0.9 million, occupancy expense of $0.2 million and other expense of $0.2 million, partially offset by a lower compensation expense of $0.6 million. Excluding OREO expense, noninterest expense declined $0.2 million. A higher level of net losses from the sale of bank owned properties drove the increase in OREO expense. The increase in occupancy expense was partially attributable to higher maintenance costs that were mostly non-routine in nature. Other expense increased due to higher legal fees reflective of an increased level of legal support needed for problem loan resolutions during the quarter. The reduction in compensation expense was due to lower performance compensation (cash incentives), payroll taxes and unemployment taxes. Compared to the second quarter of 2013, noninterest expense decreased by $1.4 million, or 4.6%, attributable to lower compensation expense of $1.4 million (reflecting lower pension expense) and other expense of $0.2 million, partially offset by higher occupancy expense of $0.3 million.

For the first six months of 2014, noninterest expense totaled $57.4 million, a decrease of $4.1 million, or 6.8%, from the same period of 2013 attributable to lower compensation expense of $2.4 million, OREO expense of $1.4 million, and other expense of $0.5 million, partially offset by higher occupancy expense of $0.2 million. Compared to the three and six-month prior year periods, the reduction in compensation expense was primarily attributable to lower pension plan expense and the decline in other expense reflects a decrease in our FDIC insurance fees. Utilization of a higher discount rate for determining pension plan liabilities drove the reduction in pension plan expense and a lower premium favorably impacted FDIC fees. Higher furniture, fixtures, and equipment maintenance costs, a majority of which were non-routine, as well as higher maintenance contract expense related to security upgrades drove the increase in occupancy costs compared to both the three and six-month prior year periods. A lower level of net losses from the sale of bank owned properties and a reduction in property valuation adjustments were the primary reasons for the reduction in OREO expense from the comparable prior year six month period.

We realized income tax expense of $0.7 million for the second quarter of 2014 compared to an income tax benefit of $1.4 million for the first quarter of 2014 and income tax expense of $0.6 million for the second quarter of 2013. For the first six months of 2014, we realized an income tax benefit of $0.6 million compared to income tax expense of $1.0 million for the same period of 2013. Income taxes for both the three and six-month periods of 2014 were favorably impacted by a $2.2 million state tax benefit attributable to an adjustment in our reserve for uncertain tax positions associated with prior year matters.

About Capital City Bank Group, Inc.

Capital City Bank Group, Inc. (CCBG) is one of the largest publicly traded financial holding companies headquartered in Florida and has approximately $2.6 billion in assets. The Company provides a full range of banking services, including traditional deposit and credit services, asset management, trust, mortgage banking, merchant services, bankcards, data processing and securities brokerage services. The Company's bank subsidiary, Capital City Bank, was founded in 1895 and now has 63 full-service offices and 71 ATMs in Florida, Georgia and Alabama. For more information about Capital City Bank Group, Inc., visit www.ccbg.com.

FORWARD-LOOKING STATEMENTS

Forward-looking statements in this Press Release are based on current plans and expectations that are subject to uncertainties and risks, which could cause the Company's future results to differ materially. The following factors, among others, could cause the Company's actual results to differ: the Company's need and our ability to incur additional debt or equity financing; the accuracy of the Company's financial statement estimates and assumptions, including the estimate used for the Company's loan loss provision and deferred tax valuation allowance; a decrease to the market value of the Company that could result in an impairment of goodwill; legislative or regulatory changes, including the Dodd-Frank Act and Basel III; the strength of the U.S. economy and the local economies where the Company conducts operations; the frequency and magnitude of foreclosure of the Company's loans; restrictions on our operations, including the inability to pay dividends without our regulators' consent; the effects of the health and soundness of other financial institutions; the effects of the Company's lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; harsh weather conditions and man-made disasters; fluctuations in inflation, interest rates, or monetary policies; changes in the stock market and other capital and real estate markets; customer acceptance of third-party products and services; increased competition and its effect on pricing, including the long-term impact on our net interest margin from the repeal of Regulation Q; negative publicity and the impact on our reputation; technological changes, especially changes that allow out of market competitors to compete in our markets; the effects of security breaches and computer viruses that may affect the Company's computer systems; changes in consumer spending and savings habits; the Company's growth and profitability; changes in accounting; and the Company's ability to manage the risks involved in the foregoing. Additional factors can be found in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and the Company's other filings with the SEC, which are available at the SEC's internet site (http://www.sec.gov). Forward-looking statements in this Press Release speak only as of the date of the Press Release, and the Company assumes no obligation to update forward-looking statements or the reasons why actual results could differ.

CAPITAL CITY BANK GROUP, INC.




EARNINGS HIGHLIGHTS




Unaudited






Three Months Ended Six Months Ended
(Dollars in thousands, except per share data) Jun 30, 2014 Mar 31, 2014 Jun 30, 2013 Jun 30, 2014 Jun 30, 2013






EARNINGS




Net Income $ 1,473 $ 3,751 $ 843 $ 5,224 $ 1,682
Net Income Per Common Share $ 0.08 $ 0.22 $ 0.05 $ 0.30 $ 0.10
PERFORMANCE




Return on Average Assets 0.23% 0.59% 0.13% 0.41% 0.13%
Return on Average Equity 2.09% 5.44% 1.35% 3.75% 1.36%
Net Interest Margin 3.29% 3.29% 3.59% 3.29% 3.61%
Noninterest Income as % of Operating Revenue 42.31% 42.05% 41.68% 42.18% 41.15%
Efficiency Ratio 91.15% 91.02% 91.07% 91.09% 91.87%
CAPITAL ADEQUACY




Tier 1 Capital Ratio 16.85% 16.85% 15.36% 16.85% 15.36%
Total Capital Ratio 18.10% 18.10% 16.73% 18.10% 16.73%
Tangible Common Equity Ratio 7.93% 7.66% 6.64% 7.93% 6.64%
Leverage Ratio 10.70% 10.47% 10.07% 10.70% 10.07%
Equity to Assets 10.97% 10.63% 9.73% 10.97% 9.73%
ASSET QUALITY




Allowance as % of Non-Performing Loans 80.03% 63.98% 65.66% 80.03% 65.66%
Allowance as a % of Loans 1.45% 1.57% 1.89% 1.45% 1.89%
Net Charge-Offs as % of Average Loans 0.59% 0.39% 0.54% 0.49% 0.60%
Nonperforming Assets as % of Loans and ORE 4.67% 5.42% 6.44% 4.67% 6.44%
Nonperforming Assets as % of Total Assets 2.66% 2.98% 3.77% 2.66% 3.77%
STOCK PERFORMANCE




High $ 14.71 $ 14.59 $ 12.64 $ 14.71 $ 12.64
Low 12.60 11.56 10.12 11.56 10.12
Close 14.53 13.28 11.53 14.53 11.53
Average Daily Trading Volume 28,428 35,921 16,366 32,114 19,827






CAPITAL CITY BANK GROUP, INC.




CONSOLIDATED STATEMENT OF FINANCIAL CONDITION




Unaudited












2014 2013
(Dollars in thousands) Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter
ASSETS




Cash and Due From Banks $ 63,956 $ 59,288 $ 55,209 $ 51,136 $ 67,811
Funds Sold and Interest Bearing Deposits 354,233 468,805 474,719 358,869 391,457
Total Cash and Cash Equivalents 418,189 528,093 529,928 410,005 459,268






Investment Securities Available for Sale 275,082 229,615 251,420 271,838 350,614
Investment Securities Held to Maturity 180,393 191,645 148,211 97,309 --
Total Investment Securities 455,475 421,260 399,631 369,147 350,614






Loans Held for Sale 13,040 12,313 11,065 13,822 15,362






Loans, Net of Unearned Interest




Commercial, Financial, & Agricultural 134,833 138,664 126,607 123,253 126,931
Real Estate - Construction 34,244 36,454 31,012 31,454 35,823
Real Estate - Commercial 518,580 522,019 533,871 570,736 581,501
Real Estate - Residential 298,647 297,842 303,618 305,811 302,254
Real Estate - Home Equity 228,232 226,411 227,922 230,212 232,530
Consumer 181,209 163,768 156,718 148,321 142,620
Other Loans 7,182 7,270 6,074 5,220 5,904
Overdrafts 2,664 2,349 2,782 2,835 2,554
Total Loans, Net of Unearned Interest 1,405,591 1,394,777 1,388,604 1,417,842 1,430,117
Allowance for Loan Losses (20,543) (22,110) (23,095) (25,010) (27,294)
Loans, Net 1,385,048 1,372,667 1,365,509 1,392,832 1,402,823






Premises and Equipment, Net 102,141 102,655 103,385 103,702 104,743
Intangible Assets 84,811 84,811 84,843 84,891 84,937
Other Real Estate Owned 42,579 44,036 48,071 53,018 55,087
Other Assets 66,209 67,205 69,471 87,055 89,024
Total Other Assets 295,740 298,707 305,770 328,666 333,791






Total Assets $ 2,567,492 $ 2,633,040 $ 2,611,903 $ 2,514,472 $ 2,561,858






LIABILITIES




Deposits:




Noninterest Bearing Deposits $ 689,844 $ 657,548 $ 641,463 $ 626,114 $ 644,739
NOW Accounts 712,385 775,439 794,746 668,240 706,101
Money Market Accounts 272,255 292,923 268,449 283,338 287,340
Regular Savings Accounts 227,470 225,481 211,668 211,174 204,594
Certificates of Deposit 206,496 212,322 219,922 228,020 228,349
Total Deposits 2,108,450 2,163,713 2,136,248 2,016,886 2,071,123






Short-Term Borrowings 36,732 48,733 51,321 51,918 46,081
Subordinated Notes Payable 62,887 62,887 62,887 62,887 62,887
Other Long-Term Borrowings 33,282 33,971 38,043 40,244 41,251
Other Liabilities 44,561 43,856 47,004 91,369 91,227






Total Liabilities 2,285,912 2,353,160 2,335,503 2,263,304 2,312,569






SHAREOWNERS' EQUITY




Common Stock 174 174 174 173 173
Additional Paid-In Capital 41,628 41,220 41,152 40,481 40,210
Retained Earnings 248,142 247,017 243,614 240,842 239,251
Accumulated Other Comprehensive Loss, Net of Tax (8,364) (8,531) (8,540) (30,328) (30,345)






Total Shareowners' Equity 281,580 279,880 276,400 251,168 249,289






Total Liabilities and Shareowners' Equity $ 2,567,492 $ 2,633,040 $ 2,611,903 $ 2,514,472 $ 2,561,858






OTHER BALANCE SHEET DATA




Earning Assets $ 2,228,339 $ 2,297,154 $ 2,274,019 $ 2,159,680 $ 2,187,549
Intangible Assets




Goodwill 84,811 84,811 84,811 84,811 84,811
Core Deposits -- -- -- -- --
Other -- -- 32 80 126
Interest Bearing Liabilities 1,551,507 1,651,755 1,647,036 1,545,821 1,576,601






Book Value Per Diluted Share $ 16.08 $ 16.02 $ 15.85 $ 14.44 $ 14.36
Tangible Book Value Per Diluted Share 11.24 11.17 10.98 9.56 9.47






Actual Basic Shares Outstanding 17,449 17,427 17,361 17,336 17,336
Actual Diluted Shares Outstanding 17,510 17,466 17,443 17,396 17,372








CAPITAL CITY BANK GROUP, INC.






CONSOLIDATED STATEMENT OF OPERATIONS






Unaudited














Six Months Ended

2014 2013 June 30,
(Dollars in thousands, except per share data) Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter 2014 2013








INTEREST INCOME






Interest and Fees on Loans $ 18,152 $ 18,098 $ 19,057 $ 19,264 $ 19,709 $ 36,250 $ 39,863
Investment Securities 939 847 760 717 710 1,786 1,414
Funds Sold 257 291 259 269 279 548 549
Total Interest Income 19,348 19,236 20,076 20,250 20,698 38,584 41,826








INTEREST EXPENSE






Deposits 293 308 314 335 367 601 782
Short-Term Borrowings 17 20 46 46 61 37 143
Subordinated Notes Payable 331 331 400 339 342 662 681
Other Long-Term Borrowings 269 291 320 330 333 560 680
Total Interest Expense 910 950 1,080 1,050 1,103 1,860 2,286
Net Interest Income 18,438 18,286 18,996 19,200 19,595 36,724 39,540
Provision for Loan Losses 499 359 397 555 1,450 858 2,520
Net Interest Income after Provision for Loan Losses 17,939 17,927 18,599 18,645 18,145 35,866 37,020








NONINTEREST INCOME






Deposit Fees 6,213 5,869 6,398 6,474 6,217 12,082 12,382
Bank Card Fees 2,820 2,707 2,656 2,715 2,754 5,527 5,415
Wealth Management Fees 1,852 1,918 2,233 2,130 1,901 3,770 3,816
Mortgage Banking Fees 738 625 654 869 968 1,363 2,011
Data Processing Fees 388 541 689 662 670 929 1,323
Securities Transactions -- -- 3 -- -- -- --
Other 1,336 1,125 1,192 1,176 1,221 2,461 2,313
Total Noninterest Income 13,347 12,785 13,825 14,026 13,731 26,132 27,260








NONINTEREST EXPENSE






Compensation 15,206 15,781 16,583 16,158 16,647 30,987 33,386
Occupancy, Net 4,505 4,298 4,349 4,403 4,161 8,803 8,579
Intangible Amortization -- 32 48 46 48 32 116
Other Real Estate 2,276 1,399 1,251 1,868 2,290 3,675 5,114
Other 7,089 6,856 7,416 7,678 7,318 13,945 14,410
Total Noninterest Expense 29,076 28,366 29,647 30,153 30,464 57,442 61,605








OPERATING PROFIT (LOSS) 2,210 2,346 2,777 2,518 1,412 4,556 2,675
Income Tax Expense (Benefit) 737 (1,405) 5 927 569 (668) 993
NET INCOME $ 1,473 $ 3,751 $ 2,772 $ 1,591 $ 843 $ 5,224 $ 1,682








PER SHARE DATA






Basic Income $ 0.08 $ 0.22 $ 0.16 $ 0.09 $ 0.05 $ 0.30 $ 0.10
Diluted Income 0.08 0.22 0.16 0.09 0.05 0.30 0.10
Cash Dividend $ 0.02 $ 0.02 $ -- $ -- $ -- $ 0.04 $ --
AVERAGE SHARES






Basic 17,427 17,399 17,341 17,336 17,319 17,413 17,311
Diluted 17,488 17,439 17,423 17,396 17,355 17,463 17,364






CAPITAL CITY BANK GROUP, INC.




ALLOWANCE FOR LOAN LOSSES




AND RISK ELEMENT ASSETS




Unaudited






2014 2014 2013 2013 2013
(Dollars in thousands, except per share data) Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter






ALLOWANCE FOR LOAN LOSSES




Balance at Beginning of Period $ 22,110 $ 23,095 $ 25,010 $ 27,294 $ 27,803
Provision for Loan Losses 499 359 397 555 1,450
Net Charge-Offs 2,066 1,344 2,312 2,839 1,959
Balance at End of Period $ 20,543 $ 22,110 $ 23,095 $ 25,010 $ 27,294
As a % of Loans 1.45% 1.57% 1.65% 1.75% 1.89%
As a % of Nonperforming Loans 80.03% 63.98% 62.48% 60.00% 65.66%






CHARGE-OFFS




Commercial, Financial and Agricultural $ 86 $ 11 $ 337 $ 138 $ 119
Real Estate - Construction -- -- 72 278 110
Real Estate - Commercial 1,029 594 676 882 1,050
Real Estate - Residential 695 731 921 1,178 1,053
Real Estate - Home Equity 375 403 362 362 322
Consumer 421 405 430 674 351
Total Charge-Offs $ 2,606 $ 2,144 $ 2,798 $ 3,512 $ 3,005






RECOVERIES




Commercial, Financial and Agricultural $ 45 $ 75 $ 33 $ 87 $ 38
Real Estate - Construction 1 4 -- 1 --
Real Estate - Commercial 152 27 14 167 144
Real Estate - Residential 52 395 179 167 396
Real Estate - Home Equity 65 11 39 13 224
Consumer 225 288 221 238 244
Total Recoveries $ 540 $ 800 $ 486 $ 673 $ 1,046






NET CHARGE-OFFS $ 2,066 $ 1,344 $ 2,312 $ 2,839 $ 1,959






Net Charge-Offs as a % of Average Loans(1) 0.59% 0.39% 0.65% 0.78% 0.54%






RISK ELEMENT ASSETS




Nonaccruing Loans $ 25,670 $ 34,558 $ 36,964 $ 41,682 $ 41,566
Other Real Estate Owned 42,579 44,036 48,071 53,018 55,087
Total Nonperforming Assets $ 68,249 $ 78,594 $ 85,035 $ 94,700 $ 96,653






Past Due Loans 30-89 Days $ 5,092 $ 4,902 $ 7,746 $ 8,427 $ 9,017
Past Due Loans 90 Days or More -- -- -- -- --
Classified Loans 95,037 107,420 115,630 128,190 153,080
Performing Troubled Debt Restructuring's $ 45,440 $ 46,249 $ 44,764 $ 50,692 $ 52,729






Nonperforming Loans as a % of Loans 1.81% 2.46% 2.64% 2.91% 2.88%
Nonperforming Assets as a % of




Loans and Other Real Estate 4.67% 5.42% 5.87% 6.38% 6.44%
Nonperforming Assets as a % of Total Assets 2.66% 2.98% 3.26% 3.77% 3.77%






(1) Annualized




















CAPITAL CITY BANK GROUP, INC.














AVERAGE BALANCE AND INTEREST RATES(1)














Unaudited
































Second Quarter 2014 First Quarter 2014 Fourth Quarter 2013 Third Quarter 2013 Second Quarter 2013
(Dollars in thousands) Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate
ASSETS:














Loans, Net of Unearned Interest $ 1,411,988 18,216 5.17% $ 1,395,506 18,161 5.28% $ 1,414,909 19,121 5.36% $ 1,436,039 19,345 5.34% $ 1,456,904 19,790 5.45
















Investment Securities














Taxable Investment Securities 345,419 816 0.87 290,942 703 0.88 255,298 608 0.86 232,094 568 0.95 225,770 578 1.02
Tax-Exempt Investment Securities 94,810 188 0.77 114,542 219 0.74 124,501 233 0.74 121,119 223 0.73 104,981 200 0.76
















Total Investment Securities 440,229 1,004 0.91 405,484 922 0.91 379,799 841 0.88 353,213 791 0.89 330,751 778 0.94
















Funds Sold 408,668 257 0.25 467,330 291 0.25 411,578 259 0.25 412,138 269 0.26 419,039 279 0.27
















Total Earning Assets 2,260,885 $ 19,477 3.46% 2,268,320 $ 19,374 3.46% 2,206,286 $ 20,221 3.64% 2,201,390 $ 20,405 3.68% 2,206,694 $ 20,847 3.79
















Cash and Due From Banks 44,115

48,084

48,519

51,640

49,081

Allowance for Loan Losses (22,255)

(23,210)

(25,612)

(27,636)

(29,012)

Other Assets 296,248

305,113

324,460

333,001

337,765

















Total Assets $ 2,578,993

$ 2,598,307

$ 2,553,653

$ 2,558,395

$ 2,564,528

















LIABILITIES:














Interest Bearing Deposits














NOW Accounts $ 724,635 $ 91 0.05% $ 770,302 $ 104 0.05% $ 697,468 $ 95 0.05% $ 676,855 $ 107 0.06% $ 716,459 $ 124 0.07
Money Market Accounts 280,619 50 0.07 274,015 48 0.07 279,608 50 0.07 $ 284,920 53 0.07 289,637 54 0.07
Savings Accounts 227,960 28 0.05 218,825 26 0.05 211,761 27 0.05 207,631 26 0.05 202,784 25 0.05
Time Deposits 209,558 124 0.24 215,291 130 0.24 224,500 142 0.25 231,490 149 0.26 231,134 164 0.29
Total Interest Bearing Deposits 1,442,772 293 0.08% 1,478,433 308 0.08% 1,413,337 314 0.09% 1,400,896 335 0.09% 1,440,014 367 0.10
















Short-Term Borrowings 44,473 17 0.15% 46,343 20 0.18% 58,126 46 0.31% 49,919 46 0.37% 52,399 61 0.47
Subordinated Notes Payable 62,887 331 2.08 62,887 331 2.10 62,887 400 2.49 62,887 339 2.11 62,887 342 2.15
Other Long-Term Borrowings 33,619 269 3.21 37,055 291 3.18 39,676 320 3.19 40,832 330 3.21 40,942 333 3.26
















Total Interest Bearing Liabilities 1,583,751 $ 910 0.23% 1,624,718 $ 950 0.24% 1,574,026 $ 1,080 0.27% 1,554,534 $ 1,050 0.27% 1,596,242 $ 1,103 0.28
















Noninterest Bearing Deposits 666,791

646,527

637,533

658,602

627,633

Other Liabilities 46,105

47,333

88,095

93,642

90,168

















Total Liabilities 2,296,647

2,318,578

2,299,654

2,306,778

2,314,043

















SHAREOWNERS' EQUITY: 282,346

279,729

253,999

251,617

250,485

















Total Liabilities and Shareowners' Equity $ 2,578,993

$ 2,598,307

$ 2,553,653

$ 2,558,395

$ 2,564,528

















Interest Rate Spread
$ 18,567 3.22%
$ 18,424 3.23%
$ 19,141 3.36%
$ 19,355 3.41%
$ 19,744 3.51
















Interest Income and Rate Earned(1)
19,477 3.46
19,374 3.46
20,221 3.64
20,405 3.68
20,847 3.79
Interest Expense and Rate Paid(2)
910 0.16
950 0.17
1,080 0.19
1,050 0.19
1,103 0.20
















Net Interest Margin
$ 18,567 3.29%
$ 18,424 3.29%
$ 19,141 3.45%
$ 19,355 3.49%
$ 19,744 3.59









Jun 2014 YTD Jun 2013 YTD
(Dollars in thousands) Average Balance Interest Average Rate Average Balance Interest Average Rate
ASSETS:





Loans, Net of Unearned Interest $ 1,403,793 $ 36,377 5.23% $ 1,476,559 $ 40,018 5.47%







Investment Securities





Taxable Investment Securities 318,332 1,519 0.84 220,458 1,168 1.03
Tax-Exempt Investment Securities 104,621 407 0.75 93,030 374 0.80







Total Investment Securities 422,952 1,926 0.91 313,488 1,542 0.98







Funds Sold 437,837 548 0.25 433,650 549 0.26







Total Earning Assets 2,264,582 $ 38,851 3.46% 2,223,697 $ 42,109 3.82%







Cash and Due From Banks 46,089

49,875

Allowance for Loan Losses (22,730)

(29,735)

Other Assets 300,656

337,673








Total Assets $ 2,588,597

$ 2,581,510








LIABILITIES:





Interest Bearing Deposits





NOW Accounts $ 747,343 $ 195 0.05% $ 752,360 $ 280 0.08%
Money Market Accounts 277,335 98 0.07 286,261 108 0.08
Savings Accounts 223,418 54 0.05 197,935 48 0.05
Time Deposits 212,408 254 0.24 234,768 346 0.30
Total Interest Bearing Deposits 1,460,504 601 0.08% 1,471,324 782 0.11%







Short-Term Borrowings 45,402 37 0.16% 53,819 143 0.54%
Subordinated Notes Payable 62,887 662 2.09 62,887 681 2.15
Other Long-Term Borrowings 35,328 560 3.19 41,915 680 3.27







Total Interest Bearing Liabilities 1,604,121 $ 1,860 0.23% 1,629,945 $ 2,286 0.28%







Noninterest Bearing Deposits 656,715

613,886

Other Liabilities 46,716

87,656








Total Liabilities 2,307,552

2,331,487








SHAREOWNERS' EQUITY: 281,045

250,023








Total Liabilities and Shareowners' Equity $ 2,588,597

$ 2,581,510








Interest Rate Spread
$ 36,991 3.23%
$ 39,823 3.54%







Interest Income and Rate Earned(1)
38,851 3.46
42,109 3.82
Interest Expense and Rate Paid(2)
1,860 0.17
2,286 0.21







Net Interest Margin
$ 36,991 3.29%
$ 39,823 3.61%







(1) Interest and average rates are calculated on a tax-equivalent basis using the 35% Federal tax rate.
(2) Rate calculated based on average earning assets.

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Contact:
J. Kimbrough Davis
Executive Vice President and Chief Financial Officer
850.402.7820

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