As filed
with the Securities and Exchange Commission on March 7, 2005
Registration
No. 333-_____________
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-4
REGISTRATION
STATEMENT UNDER
THE
SECURITIES ACT OF 1933
CAPITAL CITY BANK GROUP, INC.
(Exact
Name of Registrant as Specified in its Charter)
Florida |
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6022 |
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59-2273542 |
(State
or Other Jurisdiction of Incorporation or Organization)
|
|
(Primary
Standard Industrial Classification Code Number)
|
|
(I.R.S.
Employer
Identification
No.)
|
217 North
Monroe Street
Tallahassee,
Florida 32301
(850)
671-0300
(Address,
including zip code, and telephone number, including area
code, of
Registrant’s principal executive offices)
J.
Kimbrough Davis
Executive
Vice President and Chief Financial Officer
Capital
City Bank Group, Inc.
217 North
Monroe Street
Tallahassee,
Florida 32301
(850)
671-0300
(Name,
address, including zip code, and telephone number, including area
code, of
agent for service)
Copies
to:
Gregory
K. Bader, Esq.
Gunster,
Yoakley & Stewart, P.A.
Broward
Financial Centre, Suite 1400
Fort
Lauderdale, Florida 33394-3076
Telephone:
(954) 713-6407 |
|
Robert
C. Schwartz, Esq.
Smith,
Gambrell & Russell, LLP
1230
Peachtree Street, N.E., Suite 3100
Atlanta,
Georgia 30309-3592
Telephone:
(404) 685-7058 |
Approximate
date of commencement of proposed sale of securities to the public: As soon as
practicable after this Registration Statement becomes effective.
If the
securities being registered on this form are being offered in connection with
the formation of a holding company and there is compliance with General
Instruction G, check the following box. ¨
If this
form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ¨
_____________________
If this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
_____________________
CALCULATION
OF REGISTRATION FEE
Title
of Each Class of Securities to be Registered |
Amount
to be Registered(1) |
Proposed
Maximum Offering Price Per Share |
Proposed
Maximum Aggregate Offering Price(2) |
Amount
of Registration Fee(2) |
Common
stock, par value $.01 per share |
725,000
shares |
N/A |
$29,000,000 |
$3,414 |
(1) |
This
Registration Statement covers the maximum number of shares of the common
stock of the Registrant which is expected to be issued in connection with
the merger. |
(2) |
Pursuant
to Rule 457(f)(2) under the Securities Act and solely for the purpose of
calculating the registration fee, the proposed maximum aggregate offering
price and the amount of the registration fee should be computed based on
the aggregate book value of the common stock of First Alachua being
exchanged in the merger reduced by the cash component of the merger
consideration being paid by the Registrant. As of December 31, 2004, the
book value of First Alachua common stock was approximately $2,493.03 per
share based on 10,186 shares of First Alachua common stock outstanding.
|
In
addition, the cash component of the merger consideration is approximately
$2,847.04 per share of First Alachua common stock (subject to certain potential
reductions). Because the cash expected to be paid by the Registrant in
connection with the transaction exceeds the book value of the acquired company,
application of Rule 457(f)(3) would result in a negative proposed maximum
aggregate offering price. Therefore, solely for the purpose of calculating the
registration fee, the Registrant estimated the market value of the securities to
be received by the Registrant by multiplying the estimated purchase price of
$58,000,000 by 50%, because the merger consideration is structured to be
approximately 50% cash and 50% stock.
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until the registration statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
FIRST
ALACHUA BANKING CORPORATION
15000
NW 140th
Street
Alachua,
Florida 32615
To the shareholders of First
Alachua Banking Corporation |
[____________],
2005 |
On behalf
of First Alachua’s board of directors, I am pleased to invite you to attend a
Special Meeting of the shareholders of First Alachua Banking Corporation to be
held at First National Bank of Alachua, located at 15000 NW 140th Street,
Alachua, Florida 32615, on May 20, 2005, at [__]:00 [__].m., Eastern
Time.
At the
Special Meeting, you will be asked to approve the Agreement and Plan of Merger
by and among Capital City Bank Group, Inc., First Alachua Banking Corporation
and First National Bank of Alachua, whereby First Alachua Banking Corporation
will merge with and into Capital City Bank Group, Inc. and First National Bank
of Alachua will merge with and into Capital City Bank Group’s subsidiary,
Capital City Bank. When the merger is completed (and subject to certain
adjustments), each share of common stock held by you will be exchanged for the
right to receive $2,847.04 in cash, plus approximately 71.176 shares of CCBG
common stock. CCBG will pay First Alachua shareholders cash instead of issuing
any fractional shares in the merger.
As First
Alachua’s board of directors, we believe that the merger will have many
benefits. We believe that the combined company will have greater financial
strength and greater opportunity and flexibility to expand and diversify. The
merger is subject to certain conditions, including approval of the Agreement and
Plan of Merger by the affirmative vote of holders of a majority of the
outstanding common stock of First Alachua, and approval of the merger by various
regulatory agencies.
As First
Alachua’s board of directors, we have unanimously approved the Agreement and
Plan of Merger and recommend it to you for your approval as well.
This
Proxy Statement/Prospectus provides detailed information about the merger. We
urge you to read this entire document carefully, including the risk factors
considered by CCBG’s and First Alachua’s boards of directors beginning on page
17. You can
also get information about CCBG from the SEC. CCBG’s common stock is traded on
the Nasdaq National Market under the symbol “CCBG.”
Whether
or not you plan to attend the Special Meeting, you are urged to complete, sign,
and promptly return the enclosed proxy card. If you attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card.
On behalf
of the board of directors, I strongly urge you to vote FOR approval of the
Agreement and Plan of Merger by marking the enclosed proxy card FOR item
one.
We look
forward to seeing you at the Special Meeting.
Sincerely,
Jerry M.
Smith
President
and Chairman of the Board
Neither the Securities and Exchange Commission nor any state securities
regulatory body has approved or disapproved of the securities to be issued under
this Proxy Statement/Prospectus or determined if this Proxy Statement/Prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
The
securities offered hereby are not savings accounts or deposit accounts or other
obligations of any bank or savings association and they are not insured by the
Federal Deposit Insurance Corporation, the Bank Insurance Fund, the Savings
Association Insurance Fund, or any other government
agency.
This
Proxy Statement/Prospectus is dated [______], 2005, and was first mailed to
shareholders on [______], 2005.
PROPOSED
MERGER OF FIRST ALACHUA BANKING CORPORATION
WITH
CAPITAL CITY BANK GROUP, INC.
NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS
TO
BE HELD MAY 20, 2005
A special
meeting of the shareholders (the “Special Meeting”) of First Alachua Banking
Corporation will be held at First National Bank of Alachua, located at 15000 NW
140th Street,
Alachua, Florida, 32615, on May 20, 2005, at [__]:00 [__].m., Eastern Time, for
the following purposes:
· |
To
vote on an Agreement and Plan of Merger, pursuant to which, among other
matters, (a) First Alachua Banking Corporation will merge with and into
Capital City Bank Group, Inc. with Capital City Bank Group, Inc. being the
resulting corporation, and (b) First National Bank of Alachua will merge
with and into Capital City Bank, with Capital City Bank being the
resulting bank. |
· |
To
transact any other business that properly comes before the Special
Meeting, or any adjournments or postponements of the Special
Meeting. |
In
connection with the merger, and subject to certain potential adjustments, each
share of First Alachua common stock outstanding at the effective time of the
merger will be exchanged for $2,847.04 in cash, plus approximately 71.176 shares
of CCBG common stock. A copy of the Agreement and Plan of Merger is included in
this Proxy Statement/Prospectus in Section VIII on page 147.
The Board
of Directors of First Alachua is not aware of any other business to be presented
to a vote at the Special Meeting.
Only
shareholders of record at the close of business on [________________], 2005,
will be entitled to notice of and to vote at the Special Meeting or any
adjournments. Approval of the Agreement and Plan of Merger requires the
affirmative vote of a majority of the outstanding shares of First Alachua common
stock on that record date.
The
Board of Directors of First Alachua unanimously recommends that shareholders
vote FOR approval of the Agreement and Plan of Merger.
|
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|
|
BY ORDER OF THE BOARD OF DIRECTORS |
|
|
|
|
By: |
|
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Jerry M. Smith |
|
President and Chairman of the Board |
Alachua, Florida [___________],
2005 |
|
Whether or not you plan to attend the Special Meeting, please complete,
date, and sign the enclosed form of proxy and promptly return it in the enclosed
postage paid return envelope in order to ensure that your shares will be
represented at the Special Meeting.
Sections
607.1301 - 607.1333 of the Florida Business Corporation Act provides that each
First Alachua shareholder may dissent from the Agreement and Plan of Merger and
demand payment of the fair value of his or her shares in cash if the merger is
consummated. The right of any shareholder to receive such payment is contingent
upon strict compliance with the provisions of Sections 607.1301 - 607.1333 of
the Florida Business Corporation Act. We have included for your review the full
text of Sections 607.1301 - 607.1333 of the Florida Business Corporation Act in
Section X of the accompanying Proxy Statement/Prospectus, beginning on page
213. See
“DESCRIPTION OF THE MERGER -
Dissenters’
Rights of Appraisal” in the accompanying Proxy Statement/Prospectus, page
41.
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Page |
SECTION
I |
|
1 |
WHERE
YOU CAN FIND MORE INFORMATION ABOUT CCBG |
|
1 |
IMPORTANT
INFORMATION ABOUT THE AGREEMENT AND PLAN OF MERGER |
|
1 |
A
WARNING ABOUT FORWARD-LOOKING STATEMENTS |
|
1 |
|
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|
SECTION
II |
|
3 |
QUESTIONS
AND ANSWERS ABOUT THE MEETING |
|
3 |
SUMMARY |
|
6 |
The
Companies |
|
6 |
Capital
City Bank Group, Inc. |
|
6 |
The
Merger |
|
6 |
Background
of the Merger |
|
6 |
Our
Reasons for the Merger and Recommendation to First Alachua
Shareholders |
|
7 |
Summary
of SunTrust Robinson Humphrey Opinion to the Board of Directors of First
Alachua |
|
9 |
First
Alachua Special Shareholder Meeting |
|
9 |
Record
Date for Special Shareholder Meeting |
|
9 |
Vote
Required |
|
9 |
What
First Alachua Shareholders will Receive |
|
9 |
Regulatory
Approvals |
|
10 |
Conditions
to the Merger |
|
10 |
Termination
of the Agreement and Plan of Merger |
|
10 |
Dissenters’
Rights of Appraisal |
|
11 |
Interests
of Officers and Directors in the Merger that are Different from
Yours |
|
12 |
Important
Federal Income Tax Consequences of the Merger |
|
12 |
Accounting
Treatment of the Merger |
|
12 |
Certain
Differences in Shareholders’ Rights |
|
13 |
Comparative
Market Prices of Common Stock |
|
14 |
Listing
of CCBG Common Stock |
|
14 |
Risk
Factors |
|
14 |
Recent
Developments in CCBG’s Business |
|
15 |
Selected
Financial Data |
|
15 |
RISK
FACTORS |
|
17 |
MEETING
OF FIRST ALACHUA SHAREHOLDERS |
|
20 |
Date,
Place, Time, and Purpose |
|
20 |
Record
Date, Voting Rights, Required Vote, and Revocability of
Proxies |
|
20 |
DESCRIPTION
OF THE MERGER |
|
22 |
General |
|
22 |
Background
of the Merger |
|
24 |
Our
Reasons for the Merger and Recommendation to First Alachua
Shareholders |
|
26 |
Summary
of SunTrust Robinson Humphrey Opinion to the Board of Directors of First
Alachua |
|
27 |
Analysis
of First Alachua |
|
30 |
Analysis
of CCBG |
|
32 |
Other
Factors and Analyses |
|
33 |
Information
Regarding SunTrust Robinson Humphrey |
|
34 |
CCBG’s
Reasons for the Merger |
|
34 |
Effective
Time of the Merger |
|
35 |
Distribution
of CCBG Stock Certificates |
|
36 |
Conditions
to Consummation of the Merger |
|
37 |
Regulatory
Approvals |
|
38 |
Waiver,
Amendment, and Termination |
|
39 |
Dissenters’
Rights of Appraisal |
|
41 |
Conduct
of Business Pending the Merger |
|
45 |
Management
and Operations after the Merger; Interests of Certain Persons in the
Merger |
|
48 |
Certain
Federal Income Tax Consequences |
|
51 |
Accounting
Treatment |
|
52 |
Expenses
and Fees |
|
53 |
|
|
Page |
Resales
of CCBG Common Stock |
|
53 |
DESCRIPTION
OF CCBG CAPITAL STOCK |
|
54 |
EFFECT
OF THE MERGER ON RIGHTS OF SHAREHOLDERS |
|
55 |
Anti-Takeover
Provisions Generally |
|
56 |
Authorized
Capital Stock |
|
57 |
Amendment
of Articles of Incorporation and Bylaws |
|
58 |
Classified
Board of Directors and Absence of Cumulative Voting |
|
59 |
Director
Removal and Vacancies |
|
60 |
Indemnification |
|
60 |
Special
Meetings of Shareowners |
|
62 |
Ability
of Directors to Consider Interests Other Than Shareowners’
Interests |
|
62 |
Actions
by Shareowners Without a Meeting |
|
63 |
Shareowner
Nominations |
|
63 |
Dissenters’
Rights of Appraisal |
|
64 |
COMPARATIVE
MARKET PRICES AND DIVIDENDS |
|
64 |
Price
Range of Common Stock |
|
64 |
Stock
Purchase Program |
|
66 |
Comparative
Dividends |
|
66 |
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SECTION
III |
|
68 |
BUSINESS
OF FIRST ALACHUA |
|
68 |
General |
|
68 |
Management
Stock Ownership |
|
68 |
Voting
Securities and Principal Shareholders of First Alachua |
|
69 |
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SECTION
IV |
|
70 |
BUSINESS
OF CCBG |
|
70 |
General |
|
70 |
Banking
Services |
|
70 |
Data
Processing Services |
|
71 |
Trust
Services and Asset Management |
|
71 |
Brokerage
Services |
|
72 |
Expansion
of Business |
|
72 |
Competition |
|
72 |
Regulatory
Considerations |
|
74 |
Capital
City Bank |
|
77 |
Reserves |
|
77 |
Dividends |
|
77 |
Insurance
of Accounts and Other Assessments |
|
78 |
Transactions
With Affiliates |
|
78 |
Community
Reinvestment Act |
|
80 |
Capital
Regulations |
|
80 |
Interstate
Banking and Branching |
|
82 |
USA
Patriot Act of 2001 |
|
83 |
Consumer
Laws and Regulations |
|
83 |
Future
Legislative Developments |
|
83 |
Expanding
Enforcement Authority |
|
83 |
Effect
of Governmental Monetary Policies |
|
84 |
Website
Access to Company's Reports |
|
84 |
PROPERTIES |
|
84 |
LEGAL
PROCEEDINGS |
|
84 |
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SECTION
V |
|
85 |
MANAGEMENT
FOLLOWING THE MERGER |
|
85 |
Directors
and Executive Officers After the Merger |
|
85 |
Directors’
Fees |
|
87 |
Share
Ownership Table |
|
87 |
Compensation
Committee Report |
|
89 |
|
|
Page |
Executive
Compensation Tables |
|
91 |
Equity
Compensation Plan Information |
|
92 |
Incentive
Compensation and Stock Purchase Plans |
|
92 |
Retirement
Plans |
|
93 |
Transactions
with Management and Related Parties |
|
95 |
Five-Year
Performance Graph |
|
95 |
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SECTION
VI |
|
97 |
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003 |
|
97 |
Executive
Overview |
|
98 |
Pending
Acquisition |
|
99 |
Previous
Acquisitions |
|
99 |
Earnings
Analysis |
|
100 |
Net
Interest Income |
|
100 |
Provision
for Loan Losses |
|
104 |
Noninterest
Income |
|
105 |
Noninterest
Expense |
|
106 |
Income
Taxes |
|
107 |
Financial
Condition |
|
108 |
Loans |
|
108 |
Allowance
for Loan Losses |
|
110 |
Risk
Element Assets |
|
113 |
Investment
Securities |
|
116 |
Deposits
and Funds Purchased |
|
119 |
Liquidity
And Capital Resources |
|
120 |
Dividends |
|
123 |
Legal
Developments |
|
123 |
Off-Balance
Sheet Arrangements |
|
123 |
Accounting
Policies |
|
124 |
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 |
|
127 |
Management’s
Discussion and Analysis of Financial Condition |
|
127 |
Results
of Operations |
|
129 |
Financial
Condition |
|
133 |
Liquidity
and Capital Resources |
|
135 |
Accounting
Policies |
|
138 |
Quantitative
and Qualitative Disclosure About Market Risk |
|
142 |
Financial
Assets and Liabilities Market Risk Analysis |
|
144 |
Quarterly
Financial Data (Unaudited) |
|
145 |
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|
SECTION
VII |
|
146 |
SHAREOWNER
PROPOSALS |
|
146 |
EXPERTS |
|
146 |
LEGAL
MATTERS |
|
146 |
OTHER
MATTERS |
|
146 |
PRO
FORMA FINANCIAL INFORMATION |
|
146 |
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SECTION
VIII |
|
147 |
AGREEMENT
AND PLAN OF MERGER BY AND AMONG CAPITAL CITY BANK GROUP, INC., FIRST
ALACHUA BANKING CORPORATION AND FIRST NATIONAL BANK OF ALACHUA, DATED AS
OF FEBRUARY 3, 2005 |
|
147 |
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SECTION
IX |
|
211 |
BANK
PLAN OF MERGER |
|
211 |
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SECTION
X |
|
213 |
DISSENTERS’
RIGHTS OF APPRAISAL |
|
213 |
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Page |
SECTION
XI |
|
225 |
FAIRNESS
OPINION OF SUNTRUST ROBINSON HUMPHREY |
|
225 |
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SECTION
XII |
|
229 |
CAPITAL
CITY BANK GROUP FINANCIAL STATEMENTS |
|
229 |
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SECTION
I
WHERE
YOU CAN FIND MORE INFORMATION ABOUT CCBG
CCBG
files annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any materials CCBG files with
the SEC at the SEC’s Public Reference Room at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. You should call the SEC at
1-800-SEC-0330 for further information on the operation of the Public Reference
Room. The SEC also maintains a Web site that contains reports, proxy and
information statements and other information about CCBG. The address of the SEC
Web site is http://www.sec.gov.
CCBG
filed a Registration Statement on Form S-4 to register with the SEC the shares
that CCBG will issue to First Alachua shareholders in the merger. This Proxy
Statement/Prospectus is a part of that Registration Statement. Because the rules
and regulations of the SEC allow the omission of certain portions of the
Registration Statement from this document, this Proxy Statement/Prospectus does
not include all of the information contained in the Registration Statement. For
further information about CCBG and the securities offered in this Proxy
Statement/Prospectus, you should review the Registration Statement at the SEC’s
Public Reference Room or on its Web site.
CCBG's
internet website is www.ccbg.com. CCBG's annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, including any amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d), and reports
filed pursuant to Section 16, 13(d), and 13(g) of the Exchange Act are available
free of charge through the website as soon as reasonably practicable after they
are electronically filed with, or furnished to, the SEC. In addition, you may
obtain free of charge any such documents filed by or furnished to the SEC by
CCBG by requesting them from CCBG at the address or telephone number listed on
page 6.
PLEASE
NOTE
Neither
CCBG nor First Alachua has authorized anyone to give any information or make any
statement about the merger or either company that differs from, or adds to, the
information in the Proxy Statement/Prospectus or in other documents filed with
the SEC. Therefore, if anyone gives you different or additional information, you
should not rely on it.
If you
reside in a jurisdiction where it is unlawful to offer to exchange or sell, or
to ask for offers to exchange or buy, the securities offered by this Proxy
Statement/Prospectus or to ask for proxies, or if you are a person to whom it is
unlawful to direct such activities, then the offer presented by this Proxy
Statement/Prospectus does not extend to you.
The
information contained in this Proxy Statement/Prospectus speaks only as of its
date unless the information specifically indicates that another date
applies.
Information
in this Proxy Statement/Prospectus about CCBG has been supplied by CCBG, and
information about First Alachua has been supplied by First Alachua.
IMPORTANT
INFORMATION ABOUT THE AGREEMENT AND PLAN OF MERGER
The
Agreement and Plan of Merger, which is included in this Proxy
Statement/Prospectus in Section VIII, beginning on page 147, has been included
to provide you with information regarding its terms. It is not intended to
provide any other factual information about CCBG or First Alachua.
The
Agreement and Plan of Merger contains representations and warranties CCBG and
First Alachua made to each other. The assertions embodied in those
representations and warranties are qualified by information in confidential
disclosure schedules that CCBG and First Alachua have exchanged in connection
with signing the Agreement and Plan of Merger. While CCBG and First Alachua do
not believe that these disclosure schedules contain information securities laws
require us to publicly disclose other than information that has already been so
disclosed, the disclosure schedules do contain information that modifies,
qualifies and creates exceptions to the representations and warranties set forth
in the attached Agreement and Plan of Merger. Accordingly, you should not rely
on the representations and warranties as characterizations of the actual state
of facts, because they are modified in important part by the underlying
disclosure schedules. These disclosure schedules contain information that has
been included in CCBG’s general prior public disclosures, as well as potential
additional non-public information. Moreover, information concerning the subject
matter of the representations and warranties may have changed since the date of
the Agreement and Plan of Merger, which subsequent information may or may not be
fully reflected in CCBG’s public disclosures.
A
WARNING ABOUT FORWARD-LOOKING STATEMENTS
We have
made forward-looking statements in this Proxy Statement/Prospectus (and in other
documents filed with the SEC) that are subject to risks and uncertainties. These
statements are based on the beliefs and assumptions of CCBG’s and First
Alachua’s
managements and on information currently available to members of management.
These forward-looking statements include information about possible or assumed
future results of operations or the performance of CCBG after the merger. Many
possible events or factors could cause results or performance to differ
materially from those expressed in our forward-looking statements.
You
should consider the events or factors detailed in the “RISK FACTORS” section of
this Proxy Statement/Prospectus beginning on page 17 when you
vote on the merger.
SECTION
II
QUESTIONS
AND ANSWERS ABOUT THE MEETING
Q(1):
|
WHAT
AM I BEING ASKED TO APPROVE?
|
A:
|
You
are being asked to approve the Agreement and Plan of Merger providing for,
among other things, (a) the merger of First Alachua Banking Corporation
with and into Capital City Bank Group, Inc., with Capital City Bank Group,
Inc. being the resulting financial holding company, and (b) the merger of
First National Bank of Alachua with and into Capital City Bank, with
Capital City Bank being the resulting bank.
|
Q(2):
|
WHY
IS FIRST ALACHUA MERGING WITH CCBG?
|
A:
|
The
merger will enable First Alachua shareholders to hold stock in a larger
and more diversified entity whose shares are more widely held and more
actively traded. CCBG’s common stock is traded on the Nasdaq National
Market under the symbol “CCBG.” We also believe the merger will enable
First Alachua to serve better its customers with more products and
services. Based upon these and other factors, we believe that the merger
is in the best interest of the First Alachua shareholders. We provide the
background and more detailed reasons for the merger, starting on page
24.
|
Q(3):
|
AS
A FIRST ALACHUA SHAREHOLDER, WHAT WILL I RECEIVE IN THE
MERGER?
|
A:
|
For
each share of First Alachua common stock you own, CCBG will pay you a
combination of $2,847.04 in cash, plus approximately 71.176 shares of CCBG
common stock. There are certain potential adjustments that may reduce the
amount of cash or stock that you may receive. Cash will be paid in lieu of
issuing fractional shares based upon the average daily closing prices of
one share of CCBG common stock (as reported by the Nasdaq National Market)
for the 20 consecutive full trading days ending on and including the fifth
full trading day prior to the closing date of the merger.
|
|
Example:
If you own 10 shares of First Alachua common stock, the average daily
closing price is $40.00 per share, and there are no adjustments, upon
completion of the merger, you will receive 711 shares of CCBG common stock
and a check for $28,470.40, plus an additional $30.40 in lieu of your
remaining fractional share.
|
Q(4):
|
WHAT
HAPPENS AS THE MARKET PRICE OF CCBG COMMON STOCK FLUCTUATES?
|
A:
|
Because
the market value of CCBG common stock will fluctuate before and after the
closing date of the merger, the value of the stock you will receive as a
result of the merger will fluctuate as well and could decrease in value.
However, the Agreement and Plan of Merger provides that First Alachua may
terminate the Agreement and Plan of Merger (subject to CCBG’s right to
increase the number of CCBG shares to be issued in the merger) at any time
during the two-day period commencing at the close of trading on the fifth
full trading day prior to the closing date if both (i) the average daily
closing price of one share of CCBG common stock is less than or equal to
$34, and (ii) the number obtained by dividing the average daily closing
price of one share of CCBG common stock by 40 is less than a formula-based
weighted average of an index group of 22 bank holding
companies.
|
|
|
Q(5):
|
WHEN
DO YOU EXPECT THE MERGER TO BE COMPLETED?
|
A: |
We
expect to complete the merger during the second quarter of
2005.
|
|
The
merger must be approved by holders of a majority of the First Alachua
common stock and by certain regulatory agencies, including the Board of
Governors of the Federal Reserve System and the Florida Department of
Financial Services. Additional approvals by or notices to other Florida
state authorities may be necessary. |
|
|
Q(6):
|
WHAT
ARE THE U.S. TAX CONSEQUENCES OF THE MERGER TO ME?
|
A:
|
We
expect that for U.S. federal income tax purposes, your exchange of First
Alachua common stock for CCBG common stock in the merger generally will
not cause you to recognize any gain or loss. You will, however, have to
recognize gain in connection with any cash received in the merger. In
addition, shareholders who exercise dissenters’ rights may recognize gain
or loss in the exchange of their shares for cash. We urge you to consult
your own tax advisers as to the specific tax consequences of the merger to
you.
|
|
We
provide a more detailed review of the U.S. federal income tax consequences
of the merger at page 51 of
this Proxy Statement/Prospectus.
|
Q(7):
|
AS
A FIRST ALACHUA SHAREHOLDER, DO I HAVE TO ACCEPT CCBG COMMON STOCK IN
EXCHANGE FOR MY SHARES IF THE MERGER IS APPROVED?
|
A:
|
No.
If you are a First Alachua shareholder and you follow the procedures
prescribed by Florida law, you may dissent from the merger and receive the
fair value of your stock. If you follow those procedures, you will not
receive CCBG common stock. Instead, the fair value of your First Alachua
stock, determined in the manner prescribed by Florida law, will be paid to
you in cash.
|
Q(8):
|
WHAT
SHOULD I DO NOW?
|
A:
|
Just
indicate on your proxy card how you want to vote, sign it and mail it in
the enclosed envelope as soon as possible, so that your shares will be
represented at the Special Meeting.
|
|
If
you sign and send in your proxy and do not indicate how you want to vote,
your proxy will be voted in favor of the proposal to approve the merger.
If you do not sign and send in your proxy or attend and vote in favor of
the merger at the Special Meeting, your failure to vote will count as a
vote against the merger. Failure to vote against the merger will not
result in a waiver of your right to dissent. However, the failure to vote
or a vote against the merger, alone, will not perfect your dissenters’
rights under Florida law.
|
|
The
meeting is scheduled for May 20, 2005. You are invited to the meeting to
vote your shares in person rather than signing and mailing your proxy
card. If you do sign your card, you can take back your proxy up to and
including the time of the vote at the meeting and either change your vote
or attend the meeting and vote in person. We provide more detailed
instructions about voting starting on page 20.
|
Q(9):
|
SHOULD
I SEND IN MY STOCK CERTIFICATES NOW?
|
A:
|
No.
After the merger is completed, you will be sent written instructions
explaining how to exchange your First Alachua common stock certificates
for CCBG common stock certificates and the cash portion of the merger
consideration.
|
Q(10):
|
WHO
CAN HELP ANSWER MY QUESTIONS?
|
A:
|
If
you want additional copies of this document, or if you want to ask any
questions about the merger, you should contact:
Jerry
M. Smith, President
First
Alachua Banking Corporation
15000
NW 140th
Street
Alachua,
Florida 32615
(386)
462-1041
|
SUMMARY
This
summary highlights selected information contained elsewhere in this Proxy
Statement/Prospectus. Because this is a summary, it does not contain all of the
information that may be important to you. You should read the entire Proxy
Statement/Prospectus carefully. We have included page references in this summary
to direct you to other places in this Proxy Statement/Prospectus where you can
find a more complete description of the topics we have
summarized.
The
Companies
(See Page
68 for First Alachua, Page 70 for CCBG)
First
Alachua Banking Corporation
15000 NW
140th
Street
Alachua,
Florida 32615
(386)
462-1041
First
Alachua Banking Corporation is a financial services company and the parent
company of First National Bank of Alachua which was established in 1908. First
National Bank of Alachua is headquartered in Alachua, Florida and has assets
totaling $229 million in seven banking offices and one mortgage office in north
central Florida and one banking office in St. Johns County, Florida. First
National Bank of Alachua offers its clients a variety of services including
deposit services, loans, ATMs, credit card merchant services, investment
services, mortgage lending and business accounts. First National Bank of
Alachua’s website is www.fnba.net.
Capital
City Bank Group, Inc.
217 North
Monroe Street
Tallahassee,
Florida 32301
(850)
671-0300
CCBG is a
$2.4 billion financial holding company headquartered in Tallahassee, Florida
providing traditional deposit and credit services, asset management, trust,
mortgage banking, bankcards, data processing and securities brokerage services.
Founded in 1895, CCBG has 60 banking offices, 5 residential lending offices, 75
ATMs, and 11 Bank ‘N Shop locations in Florida, Georgia and Alabama. For more
information about CCBG, go to www.ccbg.com.
The
Merger
(See Page
22)
The
Agreement and Plan of Merger provides for CCBG to acquire First Alachua by
merging First Alachua with and into CCBG, with CCBG being the resulting
corporation. Immediately thereafter, First National Bank of Alachua will merge
with and into Capital City Bank, with Capital City Bank being the resulting
bank. A copy of the Agreement and Plan of Merger is included in this Proxy
Statement/Prospectus in Section VIII on page 147. We encourage you to read the
Agreement and Plan of Merger because it is the legal document that governs the
merger.
Background
of the Merger
(See Page
24)
In April
2004, Jerry M. Smith, Chief Executive Officer and controlling shareholder of
First Alachua, contacted representatives of SunTrust Robinson Humphrey to
discuss possible strategic alternatives, because he had concerns
about
management succession. Immediately thereafter, management of First Alachua and
SunTrust Robinson Humphrey began gathering the appropriate information and
developing a confidential memorandum describing First Alachua that could be
distributed to potential interested parties.
Upon
completion of the confidential memorandum, in mid-July 2004, SunTrust Robinson
Humphrey contacted 25 potential acquirers with respect to First Alachua. Nine
entities signed confidentiality agreements and requested the confidential
memorandum on First Alachua. Of these nine entities, two entities provided bids
to First Alachua on August 26, 2004. After requesting the two bidders to enhance
their bids and reviewing the revised bids with SunTrust Robinson Humphrey, Mr.
Smith concluded that it would be preferable to pursue a transaction with
CCBG.
After
SunTrust Robinson Humphrey and First Alachua’s counsel conducted due diligence
on CCBG in October and November and SunTrust Robinson Humphrey conducted
intensive due diligence with CCBG management in late November 2004, Mr. Smith
called a meeting of the board of directors of First Alachua to apprise the
directors of the potential transaction with CCBG. SunTrust Robinson Humphrey and
First Alachua’s counsel reviewed the terms of the transaction with the board of
directors of First Alachua. The board of directors of First Alachua unanimously
agreed to pursue the opportunity with CCBG.
On
February 3, 2005, after extensive additional discussion and deliberation, the
boards of directors of First Alachua and First National Bank of Alachua approved
the Agreement and Plan of Merger and authorized Mr. Smith to execute the
agreement on behalf of both entities.
Our
Reasons for the Merger and Recommendation to First Alachua Shareholders
(See Page
26)
The First
Alachua Board of Directors believes that the merger is in the best interests of
First Alachua and its shareholders. The First Alachua Board of Directors has
unanimously approved the Agreement and Plan of Merger. In deciding to approve
the Agreement and Plan of Merger, the First Alachua Board of Directors
considered a number of factors, including:
· |
the
value of the consideration to be received by First Alachua shareholders
relative to the book value and earnings per share of First Alachua common
stock; |
· |
certain
information concerning the financial condition, results of operations and
business prospects of CCBG; |
· |
the
financial terms of recent business combinations in the financial services
industry and a comparison of the multiples of selected combinations with
the proposed transaction with CCBG; |
· |
the
alternatives to the merger, including remaining an independent
institution; |
· |
the
previous experience of management of CCBG in completing acquisition
transactions; |
· |
the
expanded range of banking services that the merger will allow First
Alachua to provide to its customers; |
· |
the
competitive and regulatory environment for financial institutions
generally; |
· |
the
fact that the merger will enable First Alachua shareholders to exchange
their shares of First Alachua common stock, in a partially tax-free
transaction, for cash and shares of common stock of a larger company, the
stock of which is more widely held and more liquid than that of First
Alachua; and |
· |
the
opinion of SunTrust Robinson Humphrey that the consideration to be
received by First Alachua shareholders as a result of the merger is fair
to First Alachua shareholders from a financial point of
view. |
The CCBG
Board of Directors believes that the merger is in the best interests of CCBG and
its shareowners. The CCBG Board of Directors has unanimously approved the
Agreement and Plan of Merger. In deciding to approve the Agreement and Plan of
Merger, the CCBG Board of Directors considered a number of factors,
including:
· |
a
review, based in part on a presentation by CCBG’s management,
of |
-
the
business, operations, earnings, and financial condition, including the capital
levels and asset quality, of First Alachua on historical, prospective, and pro
forma bases and in comparison to other financial institutions in the area;
and
-
the demographic, economic, and financial characteristics of the Alachua and St.
Johns County markets, including existing competition, history of the market area
with respect to financial institutions, and average demand for credit, on
historical and prospective bases.
· |
the
results of CCBG’s due diligence review of First Alachua;
|
· |
the
likelihood of regulators approving the merger without undue conditions or
delay; |
· |
the
compatibility and the community bank orientation of both CCBG and First
Alachua; and |
· |
a
variety of factors affecting and relating to the overall strategic focus
of CCBG. |
The
Boards of Directors of First Alachua and CCBG believe that the merger will
result in a company with expanded opportunities for profitable growth and that
the combined resources and capital of First Alachua and CCBG will provide the
combined company with greater ability to compete in the changing and competitive
financial services industry.
The First
Alachua Board believes that the merger of First Alachua with and into CCBG is in
the best interests of First Alachua and First Alachua’s shareholders. The First
Alachua Board unanimously recommends that you vote FOR the merger.
Summary
of SunTrust Robinson Humphrey Opinion to the Board of Directors of First
Alachua
(See Page
27)
In
deciding to approve the merger, we have considered an opinion from our financial
adviser, SunTrust Robinson Humphrey, that the price to be paid to First Alachua
shareholders is fair to First Alachua shareholders, from a financial point of
view. The full text of this opinion is included in this Proxy
Statement/Prospectus in Section XI on page 225. We encourage you to read this
opinion.
First
Alachua Special Shareholder Meeting
(See Page
20)
The
Special Meeting will be held at First National Bank of Alachua, located at 15000
NW 140th Street,
Alachua, Florida 32615, on Friday, May 20, 2005, at [__]:00 [__].m., Eastern
Time. The First Alachua Board of Directors is soliciting proxies for use at the
Special Meeting. At the Special Meeting, the First Alachua Board of Directors
will ask the First Alachua shareholders to vote on a proposal to approve the
Agreement and Plan of Merger.
Record
Date for Special Shareholder Meeting
(See Page
20)
You may
vote at the Special Meeting if you owned shares of First Alachua common stock of
record as of the close of business on [_______________], [_______________],
2005. You will have one vote for each share of First Alachua common stock you
owned as of that date. You may revoke your proxy at any time prior to or at the
time of the vote at the Special Meeting.
Vote
Required
(See Page
20)
Shareholders
holding a majority of the outstanding shares of First Alachua common stock
entitled to vote at the Special Meeting must be present in person or by proxy at
the Special Meeting in order to form a quorum.
In order
to approve the merger, however, shareholders holding a majority of the
outstanding shares of First Alachua common stock must approve the Agreement and
Plan of Merger. At the record date, all directors and executive officers of
First Alachua as a group (___ persons) could vote approximately ________ shares
of First Alachua common stock, constituting approximately _____% of the total
number of shares of First Alachua common stock outstanding at that date. The
First Alachua directors have committed to vote their shares of First Alachua
common stock in favor of the merger.
What
First Alachua Shareholders will Receive
(See Page
36)
Under the
Agreement and Plan of Merger and subject to certain potential adjustments, CCBG
will pay First Alachua shareholders $2,847.04 in cash, plus approximately 71.176
shares of CCBG common stock for each share of First Alachua common stock that
they own.
First
Alachua shareholders will not receive fractional shares of CCBG common stock.
Instead, they will receive a payment for any fractional shares based on the
average of the daily closing sales prices of one share of CCBG common stock, as
reported by the Nasdaq National Market, for the 20
consecutive
full trading days ending on and including the fifth full trading day prior to
the closing date of the merger.
In
addition, as a condition to the merger, First Alachua must have, immediately
prior to the effective date of the merger, a net worth of at least $25.375
million, subject to certain adjustments. Based on First Alachua’s last call
report filed with the FDIC, as of December 31, 2004, First Alachua had an
unaudited net worth of approximately $25.392 million. Based on CCBG’s closing
market price on the Nasdaq National Market on February 3, 2005 (the day prior to
the public announcement of the Agreement and Plan of Merger), shareholders would
receive total aggregate consideration of approximately $58.0 million, or
$5,690.53 per share (assuming 10,186 First Alachua common shares are
outstanding).
Once the
merger is complete, CCBG’s transfer agent will mail you materials and
instructions for exchanging your First Alachua stock certificates for CCBG stock
certificates and the cash portion of the consideration. You should not send in
your First Alachua stock certificates until you receive the transmittal
materials and instructions from CCBG’s transfer agent.
Regulatory
Approvals
(See Page
38)
We cannot
complete the merger until we receive the approval of the Board of Governors of
the Federal Reserve System and the Florida Department of Financial Services.
CCBG and First Alachua have filed applications with the Federal Reserve Board
and the Florida Department of Financial Services seeking approval of the
merger. The
approvals of these regulators may impose conditions or restrictions that, in the
opinion of CCBG and/or First Alachua, would have a material adverse effect on
the economic or business benefits of the merger. In that event, CCBG and First
Alachua may terminate the Agreement and Plan of Merger by mutual
consent.
Conditions
to the Merger
(See Page
37)
The
completion of the merger depends upon CCBG and First Alachua satisfying a number
of conditions, including:
· |
the
holders of a majority of the outstanding First Alachua common stock must
approve the Agreement and Plan of Merger; |
· |
First
Alachua must have a minimum net worth of at least $25.375 million, subject
to certain adjustments; |
· |
CCBG
and First Alachua must receive all required regulatory approvals and any
waiting periods required by law must have passed;
and |
· |
CCBG
and First Alachua must each receive a legal opinion confirming the
tax-free nature of the merger. |
Termination
of the Agreement and Plan of Merger
(See Page
39)
Either
CCBG or First Alachua may terminate the Agreement and Plan of Merger without
completing the merger if, among other things, any of the following
occurs:
· |
the
merger is not completed by August 31, 2005; |
· |
the
holders of a majority of the outstanding shares of First Alachua common
stock do not approve the Agreement and Plan of Merger;
or |
· |
the
other party breaches or materially fails to comply with any of its
representations or warranties, covenants or obligations under the
Agreement and Plan of Merger. |
First
Alachua may terminate the Agreement and Plan of Merger without completing the
merger if both:
· |
the
adjusted average daily closing price of CCBG common stock is less than or
equal to $34.00; and |
· |
the
quotient obtained by dividing the average closing price by 40 is less than
a formula based on the weighted average of the closing prices of an index
group of 22 bank holding companies. |
CCBG may
terminate the Agreement and Plan of Merger without completing the
merger:
· |
in
the event that the due diligence investigation of First Alachua by CCBG
results in a finding of an event or circumstance that has had or is
reasonably likely to have a material adverse effect on First Alachua’s
financial position or business; |
· |
if
the audit opinion of First Alachua’s auditor is qualified and the total
capital of First Alachua as of September 30, 2004 is not readily
determinable by First Alachua’s auditor, and if CCBG and First Alachua
cannot agree upon appropriate audit adjustments within 30 days of delivery
of the audit opinion from First Alachua’s auditor; or
|
· |
in
the event that the Board of Directors of First Alachua or First National
Bank of Alachua does not reaffirm its approval of the Agreement and Plan
of Merger. |
Dissenters’
Rights of Appraisal
(See Page
41 and Page 213)
Each
holder of First Alachua common stock as of the record date who perfects his or
her rights is entitled to the dissenters’ rights of appraisal under the Florida
Business Corporation Act, subject to compliance with the procedures set forth in
those dissenters’ rights of appraisal provisions. Pursuant to Section 607.1302
of the Florida Business Corporation Act, a First Alachua shareholder who does
not wish to accept the shares of CCBG common stock to be received pursuant to
the terms of the Agreement and Plan of Merger may dissent from the merger and
elect to receive the fair value of his or her shares immediately prior to the
completion of the merger. A copy of the dissenters’ rights of appraisal statute
under the Florida Business Corporation Act is set forth in this Proxy
Statement/Prospectus in Section X on page 213 and a summary is included under
“DESCRIPTION OF THE MERGER - Dissenters’ Rights of Appraisal.”
Interests
of Officers and Directors in the Merger that are Different from
Yours
(See
Page 48)
Certain
members of First Alachua’s management and Board of Directors have interests in
the merger that are in addition to their interests as shareholders of First
Alachua.
Jerry M.
Smith, Chairman, President and Chief Executive Officer, will be paid a bonus of
up to $1,000,000 by either CCBG or Capital City Bank upon the successful
completion of the merger and will enter into a three-year employment agreement
with CCBG.
The
Agreement and Plan of Merger contains provisions for the indemnification of
First Alachua directors, officers and employees by CCBG, and provisions for the
officers and employees of First Alachua to receive certain employee benefits
that CCBG already provides to its officers and employees.
In
addition, the Agreement and Plan of Merger contains provisions for CCBG to
provide directors’ and officers’ liability insurance (with certain cost
restraints) to First Alachua’s officers and directors, for three years after the
effective time of the merger.
The CCBG
and First Alachua Boards of Directors were aware of these interests and took
them into account in approving the Agreement and Plan of Merger.
Important
Federal Income Tax Consequences of the Merger
(See Page
51)
It is
anticipated that CCBG, First Alachua and their shareowners will not recognize
any gain or loss for U.S. federal income tax purposes from the merger, except
for the cash portion of the consideration paid to First Alachua shareholders for
their First Alachua common stock and where First Alachua shareholders receive
cash instead of fractional shares. Both CCBG and First Alachua will receive a
legal opinion to that effect. Forms of these legal opinions are filed as
exhibits to the Registration Statement of which this Proxy Statement/Prospectus
is a part. However, the opinions do not bind the Internal Revenue Service, which
could take a different view. In addition, this tax treatment will not apply to
any First Alachua shareholder who receives cash for his or her shares due to the
exercise of dissenters’ rights. Determining the actual tax consequences of the
merger to you as an individual taxpayer can be complicated, and the tax
treatment also may depend upon facts that are unique to your specific situation.
Accordingly, you should consult your own tax adviser for a full understanding of
the tax consequences of the merger.
Accounting
Treatment of the Merger
(See Page
52)
The
merger will be accounted for as a “purchase,” as that term is used under
accounting principles generally accepted in the United States, for accounting
and financial reporting purposes. Under purchase accounting, the assets and
liabilities of First Alachua as of the effective time of the merger will be
recorded at their respective fair values and added to those of CCBG. Any excess
of purchase price over the fair values is recorded as goodwill. Financial
statements of CCBG issued after the merger would reflect
such fair
values and would not be restated retroactively to reflect the historical
financial position or results of operations of First Alachua.
Certain
Differences in Shareholders’ Rights
(See Page
55)
When the
merger is consummated, First Alachua shareholders, whose rights are governed by
First Alachua’s Articles of Incorporation and Bylaws, as amended, and by the
Florida Business Corporation Act, will automatically become CCBG shareowners,
and their rights as CCBG shareowners will be determined by CCBG’s Articles of
Incorporation and Bylaws and by the Florida Business Corporation Act. The rights
of CCBG shareowners differ from the rights of First Alachua shareholders in
certain important respects. For example:
· |
CCBG’s
Articles of Incorporation and Bylaws contain certain provisions designed
to assist the CCBG Board of Directors with protecting the interests of
CCBG and its shareowners if any group or person attempts to acquire
control of CCBG, while First Alachua's do not.
|
· |
CCBG
is authorized to issue both common and preferred stock (which has not been
designated), whereas First Alachua has only Class A common stock and Class
B common stock authorized. |
· |
The
affirmative vote of the holders of at least two-thirds of all the issued
and outstanding voting shares of capital stock is required to amend
certain provisions of CCBG’s Articles of Incorporation, including
provisions relating to shareowner meetings, nomination, election and
removal of directors, acquisition offers, indemnification, and amendments.
Amendment of the First Alachua Articles of Incorporation only requires a
majority of the outstanding shares of capital stock.
|
· |
CCBG
has a classified Board of Directors, divided into three classes. Each
class serves a three-year term with one class's term expiring each year.
The effect of CCBG having a classified Board of Directors is that only
approximately one-third of the members of the Board is elected each year.
First Alachua does not have a classified board, and each director of First
Alachua is subject to annual elections. |
· |
CCBG's
bylaws expand the Florida Business Corporation Act's statutory scheme of
indemnification of officers and directors by providing for the mandatory
indemnification of any of its officers and directors for costs and
expenses actually and reasonably incurred in connection with a legal
proceeding, regardless of whether the officer or director is successful on
the merits or otherwise, including amounts paid in settlement of such a
proceeding, to the fullest extent permitted by the Florida Business
Corporation Act, and requires advancement of such costs and other expenses
during pending proceedings. The Board of Directors also has discretionary
ability to provide indemnification with respect to other persons, such as
agents and employees. Indemnification of First Alachua’s directors,
officers, employees, and other agents is provided pursuant to the Florida
Business Corporation Act. Neither the Articles of Incorporation nor the
Bylaws of First Alachua provide for an expansion of the indemnification
rights provided under the Florida Business Corporation Act.
|
· |
CCBG’s
Articles of Incorporation expressly require the Board of Directors to
consider all factors it deems relevant in evaluating a proposed share
exchange, tender offer, merger, consolidation, or other similar
transaction. Under the Florida Business Corporation Act, First Alachua's
Board of Directors may rely upon such factors as the directors deem
relevant in evaluating such transactions. |
· |
CCBG’s
Bylaws provide that any action required or permitted to be taken at a
meeting of shareowners may not be effected by the written consent of the
shareowners entitled to vote on the action, whereas First Alachua’s Bylaws
provide that any action required or permitted to be taken at a meeting of
shareholders may be taken without a meeting if a consent in writing,
setting forth the action taken, shall be signed by all of the shareholders
entitled to vote with respect to the relevant subject matter.
|
· |
Because
CCBG's common stock is traded on the Nasdaq National Market, shareowners
of CCBG generally do not have dissenters' rights of appraisal under the
Florida Business Corporation Act, whereas First Alachua's shareholders do.
|
Comparative
Market Prices of Common Stock
(See Page
64)
CCBG
common stock is traded on the Nasdaq National Market under the symbol “CCBG.”
First Alachua common stock is not traded in any established market. On February
3, 2005, the last day prior to the public announcement of the Agreement and Plan
of Merger, the last reported sale price per share of CCBG common stock on the
Nasdaq National Market was $39.95. Based on the combined $2,847.04 in cash and
the exchange ratio of approximately 71.176 shares of CCBG stock for each share
of stock, the resulting equivalent pro forma price per share of First Alachua
common stock would have been $5,690.53.
To the
knowledge of First Alachua, the most recent sale of First Alachua common stock
prior to February 3, 2005, the last day prior to the public announcement of the
Agreement and Plan of Merger was on January 30, 2002, which was a sale of 25
shares for a purchase price of $1,537.67 per share. To the knowledge of First
Alachua, there have been no sales since the announcement of the merger. There
can be no assurance as to what the market price of the CCBG common stock will be
if and when the merger is consummated.
Listing
of CCBG Common Stock
(See Page
54)
CCBG will
list the shares of CCBG common stock to be issued in connection with the merger
on the Nasdaq National Market.
Risk
Factors
(See Page
17)
An
investment in CCBG common stock involves risks. In determining whether to
approve the Agreement and Plan of Merger, you should consider the various risks
associated with an investment in CCBG common stock as more fully described in
the “Risk Factors” section beginning on page 17.
Recent
Developments in CCBG’s Business
On March
19, 2004, Capital City Bank completed its merger with Quincy State Bank, a
former affiliate of Synovus Financial Corp. Results of Quincy’s operations have
been included in CCBG’s consolidated financial statements since March 20, 2004.
Quincy had $116.6 million in assets with one office in Quincy, Florida and one
office in Havana, Florida. The transaction was accounted for as a purchase and
resulted in approximately $14.9 million of intangible assets, including
approximately $12.5 million in goodwill and a core deposit intangible of $2.4
million. The core deposit intangible is being amortized over a seven-year
period.
On
October 15, 2004, CCBG completed its merger with Farmers and Merchants Bank.
Results of Farmers and Merchants Bank’s operations have been included in CCBG’s
consolidated financial statements since October 16, 2004. Farmers and Merchants
Bank had $411 million in assets with three full-service offices in Laurens
County, Georgia. The
transaction was accounted for as a purchase and resulted in approximately $41.1
million of intangible assets, including approximately $34.7 million in goodwill,
a core deposit intangible of $5.9 million and a non-compete agreement of
approximately $0.5 million. The core deposit intangible is being amortized over
a seven-year period and the non-compete is being amortized over a two-year
period.
Selected
Financial Data
The
following table presents selected consolidated financial data for CCBG for the
nine-month periods ended September 30, 2003 and 2004, and for the five-year
period ended December 31, 2003. The CCBG information is based on the
consolidated financial statements contained in reports CCBG filed with the SEC,
including its Annual Report on Form 10-K for the year ended December 31, 2003
and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.
These financial statements are included in this Proxy Statement/Prospectus in
Section XII, beginning on page 229. See “WHERE YOU CAN FIND MORE INFORMATION
ABOUT CCBG,” on page 1. You should read the following tables in conjunction with
the consolidated financial statements of CCBG described above and the footnotes
to them.
Historical
results are not necessarily indicative of results to be expected for any future
period. In the opinion of the management of CCBG, all adjustments (which include
only normal recurring adjustments) necessary to arrive at a fair statement of
interim results of operations of CCBG have been included. With respect to CCBG,
results for the nine-month period ended September 30, 2004 are not necessarily
indicative of results which may be expected for any other interim period or for
the year as a whole.
Capital
City Bank Group, Inc. and Subsidiary |
|
|
|
|
|
At
or for the nine months ended
September
30, |
|
At
or for the year
ended
December 31, |
|
(Dollars
in Thousands, Except Per Share Data) (1) |
|
2004 |
|
2003 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income |
|
$ |
71,595 |
|
$ |
71,807 |
|
$ |
94,830 |
|
$ |
104,165 |
|
$ |
117,156 |
|
$ |
107,720 |
|
$ |
98,221 |
|
Net
Interest Income |
|
|
61,788 |
|
|
60,307 |
|
|
79,991 |
|
|
81,662 |
|
|
68,907 |
|
|
61,486 |
|
|
56,974 |
|
Provision
for Loan Losses |
|
|
1,841 |
|
|
2,586 |
|
|
3,436 |
|
|
3,297 |
|
|
3,983 |
|
|
3,120 |
|
|
2,440 |
|
Net
Income |
|
|
22,109 |
|
|
19,097 |
|
|
25,193 |
|
|
23,082 |
|
|
16,866 |
|
|
18,153 |
|
|
15,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Net Income |
|
$ |
1.67 |
|
$ |
1.44 |
|
$ |
1.91 |
|
$ |
1.75 |
|
$ |
1.27 |
|
$ |
1.43 |
|
$ |
1.20 |
|
Diluted
Net Income |
|
|
1.67 |
|
|
1.44 |
|
|
1.90 |
|
|
1.74 |
|
|
1.27 |
|
|
1.43 |
|
|
1.20 |
|
Cash
Dividends Declared |
|
|
.540 |
|
|
.476 |
|
|
.656 |
|
|
.502 |
|
|
.476 |
|
|
.436 |
|
|
.442 |
|
Diluted
Book Value |
|
|
16.48 |
|
|
15.00 |
|
|
15.27 |
|
|
14.08 |
|
|
12.86 |
|
|
11.61 |
|
|
10.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based
on Net Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on Average Assets |
|
|
1.55 |
% |
|
1.42 |
% |
|
1.40 |
% |
|
1.34 |
% |
|
0.99 |
% |
|
1.24 |
% |
|
1.06 |
% |
Return
on Average Equity |
|
|
13.98 |
% |
|
13.11 |
% |
|
12.82 |
% |
|
12.85 |
% |
|
10.00 |
% |
|
12.99 |
% |
|
11.64 |
% |
Dividend
Payout Ratio |
|
|
31.70 |
% |
|
32.94 |
% |
|
34.51 |
% |
|
28.87 |
% |
|
37.48 |
% |
|
30.49 |
% |
|
36.83 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Averages
for the Period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
Net of Unearned Interest |
|
$ |
1,457,826 |
|
$ |
1,314,173 |
|
$ |
1,318,080 |
|
$ |
1,256,107 |
|
$ |
1,184,290 |
|
$ |
1,002,122 |
|
$ |
884,323 |
|
Earning
Assets |
|
|
1,697,081 |
|
|
1,620,774 |
|
|
1,624,680 |
|
|
1,556,500 |
|
|
1,534,548 |
|
|
1,315,024 |
|
|
1,291,262 |
|
Assets |
|
|
1,900,601 |
|
|
1,799,955 |
|
|
1,804,895 |
|
|
1,727,180 |
|
|
1,704,167 |
|
|
1,463,612 |
|
|
1,444,069 |
|
Deposits |
|
|
1,513,787 |
|
|
1,425,308 |
|
|
1,431,808 |
|
|
1,424,999 |
|
|
1,442,916 |
|
|
1,207,103 |
|
|
1,237,405 |
|
Long-Term
Debt |
|
|
53,560 |
|
|
59,878 |
|
|
55,594 |
|
|
30,423 |
|
|
15,308 |
|
|
13,070 |
|
|
17,274 |
|
Shareowners’
Equity |
|
|
211,315 |
|
|
194,784 |
|
|
196,588 |
|
|
179,652 |
|
|
168,652 |
|
|
139,738 |
|
|
131,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End
Balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
Net of Unearned Interest |
|
$ |
1,540,650 |
|
$ |
1,322,888 |
|
$ |
1,341,632 |
|
$ |
1,285,221 |
|
$ |
1,243,351 |
|
$ |
1,051,832 |
|
$ |
928,486 |
|
Earning
Assets |
|
|
1,744,677 |
|
|
1,647,201 |
|
|
1,648,818 |
|
|
1,636,472 |
|
|
1,626,841 |
|
|
1,369,294 |
|
|
1,263,296 |
|
Assets |
|
|
1,951,793 |
|
|
1,854,423 |
|
|
1,846,502 |
|
|
1,824,771 |
|
|
1,821,423 |
|
|
1,527,460 |
|
|
1,430,520 |
|
Deposits |
|
|
1,570,547 |
|
|
1,485,441 |
|
|
1,474,205 |
|
|
1,434,200 |
|
|
1,550,101 |
|
|
1,268,367 |
|
|
1,202,658 |
|
Long-Term
Debt |
|
|
62,930 |
|
|
38,016 |
|
|
46,475 |
|
|
71,745 |
|
|
13,570 |
|
|
11,707 |
|
|
14,258 |
|
Shareowners’
Equity |
|
|
219,069 |
|
|
198,891 |
|
|
202,809 |
|
|
186,531 |
|
|
171,783 |
|
|
147,607 |
|
|
132,216 |
|
Equity
to Assets Ratio |
|
|
11.22 |
% |
|
10.73 |
% |
|
10.98 |
% |
|
10.22 |
% |
|
9.43 |
% |
|
9.66 |
% |
|
9.24 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Average Shares Outstanding |
|
|
13,282,090 |
|
|
13,221,838 |
|
|
13,222,487 |
|
|
13,225,285 |
|
|
13,241,957 |
|
|
12,732,749 |
|
|
12,718,681 |
|
Shareowners
of Record |
|
|
1,591 |
|
|
1,532 |
|
|
1,512 |
|
|
1,457 |
|
|
1,473 |
|
|
1,599 |
|
|
1,362 |
|
Banking
Locations |
|
|
57 |
|
|
57 |
|
|
57 |
|
|
54 |
|
|
56 |
|
|
56 |
|
|
48 |
|
Full-Time
Equivalent Associates |
|
|
825 |
|
|
791 |
|
|
795 |
|
|
781 |
|
|
787 |
|
|
791 |
|
|
678 |
|
(1) |
All
shares and per share data have been adjusted to reflect the 5-for-4 stock
split effective June 13, 2003. |
RISK
FACTORS
In
addition to the other information contained in this Proxy Statement/Prospectus,
in deciding whether to approve the Agreement and Plan of Merger, you should
consider the various risks associated with an investment in CCBG common stock,
including, but not limited to the following:
CCBG
may have difficulties integrating First Alachua’s operations into CCBG’s
operations.
The
merger involves the integration of two companies that have previously operated
independently of each other. Successful integration of First Alachua’s
operations will depend primarily on CCBG’s ability to consolidate its
operations, systems and procedures into those of CCBG and to eliminate
redundancies and costs. We may not be able to integrate our operations without
encountering difficulties including, without limitation:
· |
the
loss of key employees and customers; |
· |
possible
inconsistencies in standards, control procedures and policies;
and |
· |
unexpected
problems with costs, operations, personnel, technology or
credit. |
In
determining that the merger is in the best interests of CCBG and First Alachua,
as the case may be, the Board of Directors of each of CCBG and First Alachua
considered that enhanced earnings may result from the consummation of the
merger, including from the reduction of duplicate costs, improved efficiency and
cross-marketing opportunities. However, we cannot assure that any enhanced
earnings or cost savings will actually occur from the merger.
There
is a limited market for shares of CCBG common stock.
While
CCBG common stock is listed and traded on the Nasdaq National Market, there has
been limited trading activity in CCBG common stock. The average daily trading
volume of CCBG common stock over the twelve-month period ending December 31,
2004 was approximately 10,761 shares. CCBG does not anticipate that the merger
will cause any significant improvements in the trading of CCBG common
stock.
CCBG
and Capital City Bank are subject to extensive governmental
regulation.
CCBG and
Capital City Bank are subject to extensive governmental regulation. CCBG, as a
financial holding company, is regulated primarily by the Federal Reserve.
Capital City Bank is a commercial bank chartered by the State of Florida and
regulated by the Federal Reserve, the Federal Deposit Insurance Corporation and
the Florida Department of Financial Services. These federal and state bank
regulators have the ability, should the situation require, to place significant
regulatory and operational restrictions upon CCBG and Capital City Bank. Any
such restrictions imposed by federal and state bank regulators could affect the
profitability of CCBG and Capital City Bank.
The
financial institution industry is very competitive.
CCBG and
Capital City Bank compete directly with financial institutions that are well
established and have significantly greater resources and lending limits than
CCBG and Capital City Bank. As a result of those greater resources, the large
financial
institutions may be able to provide a broader range of services to their
customers than CCBG and may be able to afford newer and more sophisticated
technology than CCBG. The long-term success of CCBG will be dependent on the
ability of Capital City Bank to compete successfully with other financial
institutions in its service areas.
Management
of CCBG holds a large portion of CCBG common stock.
As of the
record date, the directors and executive officers of CCBG beneficially owned
about ___ million shares of CCBG common stock, or ___%, of the total outstanding
shares of CCBG. As a result, CCBG’s management has significant control of
CCBG.
CCBG’s
Articles of Incorporation and Bylaws may prevent or delay a takeover by another
company.
CCBG’s
Articles of Incorporation permit the Board of Directors of CCBG to issue
preferred stock without shareowner action. The ability to issue preferred stock
could discourage a company from attempting to obtain control of CCBG by means of
a tender offer, merger, proxy contest or otherwise. Additionally, CCBG’s
Articles of Incorporation and Bylaws divide the Board of Directors of CCBG into
three classes, as nearly equal in size as possible, with staggered three-year
terms. One class is elected each year. The classification of the Board of
Directors could make it more difficult for a company to acquire control of CCBG.
CCBG is also subject to certain provisions of the Florida Business Corporation
Act and the CCBG Articles of Incorporation which relate to business combinations
with interested shareowners.
The
fairness opinion obtained by First Alachua will not reflect changes in
circumstances between the signing of the Agreement and Plan of Merger and the
closing date.
First
Alachua has not obtained an updated opinion as of the date of this document from
its financial adviser. Changes in the operations and prospects of First Alachua,
general market and economic conditions and other factors which may be beyond the
control of First Alachua, and on which the fairness opinion was based, may alter
the value of First Alachua or the prices of shares of First Alachua common stock
and shares of CCBG common stock by the time the merger is completed. The opinion
does not speak as of the time the merger will be completed or as of any date
other than the date of such opinion. For a description of the opinion that First
Alachua received from its financial adviser, please refer to “DESCRIPTION OF THE
MERGER - Summary of SunTrust Robinson Humphrey Opinion to the Board of Directors
of First Alachua” on page 27.
Because
the market price of CCBG common stock may fluctuate, you cannot be sure of the
value of the merger consideration that you will receive.
Upon
completion of the merger, and subject to certain potential adjustments, each
share of First Alachua common stock will be converted into merger consideration
consisting of $2,847.04 in cash and approximately 71.176 shares of CCBG common
stock pursuant to the terms of the Agreement and Plan of Merger. The price of
CCBG common stock may increase or decrease before or after completion of the
merger and, therefore, the implied value of the stock portion of the merger
consideration may be higher or lower than the implied value of the stock portion
of the merger consideration on February 3, 2005 or the closing time of the
merger. Stock price changes may result from a variety of factors, including
general market and economic
conditions,
changes in our respective businesses, operations and prospects, and regulatory
considerations. Many of these factors are beyond our control.
If,
at the effective time, the CCBG stock does not constitute at least 45% of the
merger consideration, the parties will re-evaluate the transaction before
consummating the merger.
As a
condition to the merger, at the effective time, each of Gunster, Yoakley &
Stewart, P.A., counsel to CCBG, and Smith, Gambrell & Russell, LLP, counsel
to First Alachua, is expected to opine that the merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended, and that neither CCBG nor First Alachua will recognize gain
or loss by reason of the merger (except for amounts resulting from any required
change in accounting methods and any income and deferred gain or loss recognized
pursuant to Treasury regulations issued under Section 1502 of the Internal
Revenue Code). If at the effective time, however, the CCBG stock does not
constitute at least 45% of the merger consideration, the firms will re-evaluate
the transaction to determine whether to issue the referenced tax opinions, and
the parties will re-evaluate the transaction before consummating the merger. If
the parties re-evaluate the transaction in this event, the parties may decide
not to consummate the merger or may renegotiate the terms of the
merger.
We
may not receive required regulatory approvals.
Such
approvals, if received, may be subject to adverse regulatory conditions. Before
the merger may be completed, various approvals must be obtained from the Board
of Governors of the Federal Reserve System and the Florida Department of
Financial Services. We cannot guarantee that we will receive all required
regulatory approvals in order to complete the merger. In addition, some of the
governmental authorities from whom those approvals must be obtained may impose
conditions on the completion of the merger or require changes in the terms of
the merger. These conditions or changes could have the effect of delaying the
merger or imposing additional costs or limiting the possible revenues of the
combined company.
CCBG’s
financial success depends in part on the successful integration of its recent
acquisitions.
CCBG’s
future growth and profitability depends, in part, on its ability to complete
successfully its acquisition of First Alachua and manage the combined operations
as well as the operations of Farmers and Merchants Bank, which was acquired on
October 15, 2004 and Quincy State Bank, which was acquired on March 14, 2004.
For the acquisitions to be successful, CCBG will have to succeed in combining
the personnel and operations of CCBG, First Alachua, Farmers and Merchants Bank
and Quincy State Bank and in achieving expense savings by eliminating selected
redundant operations. We cannot assure you that our plan to integrate and
operate the combined operations will be timely or efficient, or that we will
successfully retain existing customer relationships of First National Bank of
Alachua.
First
Alachua Directors and Executive Officers Have Interests in the Merger Besides
Those of a Shareholder.
Some of
First Alachua’s executive officers participated in negotiations of the Agreement
and Plan of Merger with CCBG, and the board of directors approved the Agreement
and Plan of Merger and is recommending that First Alachua shareholders vote for
the Agreement and Plan of Merger. In considering these facts and the other
information contained in this Proxy Statement/Prospectus, you should be aware
that First Alachua’s executive officers and directors have financial interests
in the
merger
besides being First Alachua shareholders. Please refer to “Interests of Certain
Persons in the Merger” on page 48. These interests include:
Jerry M.
Smith, Chairman, Chief Executive Officer and President, will be paid a bonus of
up to $1,000,000 by either CCBG or Capital City Bank upon the successful
completion of the merger and will enter into a three-year employment agreement
with CCBG.
The
Agreement and Plan of Merger contains provisions for the indemnification of
First Alachua directors, officers and employees by CCBG, and provisions for the
officers and employees of First Alachua to receive certain employee benefits
that CCBG already provides to its officers and employees.
In
addition, the Agreement and Plan of Merger contains provisions for providing
directors’ and officers’ liability insurance (with certain cost restraints), for
three years after the effective time of the merger.
MEETING
OF FIRST ALACHUA SHAREHOLDERS
Date,
Place, Time, and Purpose
The First
Alachua Board of Directors is sending you this Proxy Statement/Prospectus in
connection with the solicitation by the First Alachua Board of Directors of
proxies for use at the Special Meeting. CCBG will pay the filing fees and
one-half of the printing costs incurred in connection with this Proxy
Statement/Prospectus and the registration statement of which this Proxy
Statement/Prospectus is a part. First Alachua will pay one-half of the printing
costs. At the Special Meeting, the First Alachua Board of Directors will ask you
to vote on a proposal to approve the Agreement and Plan of Merger. First Alachua
will pay all other costs associated with the solicitation of proxies for the
Special Meeting. The Special Meeting will be held at First National Bank of
Alachua, located at 15000 NW 140th Street,
Alachua, Florida 32615, on Friday, May 20, 2005, at [__]:00 [__].m., Eastern
Time.
Record
Date, Voting Rights, Required Vote, and Revocability of
Proxies
First
Alachua has set the close of business on [__________________],
[__________________], 2005, as the record date for determining the holders of
First Alachua common stock entitled to notice of and to vote at the Special
Meeting. Only holders of First Alachua common stock of record on the books of
First Alachua at the close of business on the record date are entitled to notice
of and to vote at the Special Meeting. As of the record date, First Alachua had
4,456 shares of Class A common stock and 5,730 shares of Class B common stock
outstanding. First Alachua has no other classes of authorized capital stock.
First Alachua shareholders do not have the preemptive right to purchase or
subscribe to any unissued authorized shares of First Alachua common
stock.
The Class
B common stock was created in connection with the assumption by First Alachua of
debt of certain Class B shareholders. While the debt was outstanding, Class A
shareholders were entitled to dividend and liquidation preferences. The
principal and interest on the debt related to the Class B common stock was
repaid in full and retired as of March 26, 1990. Thus, the Class A common stock
and Class B common stock currently have identical rights, preferences and
limitations.
The
executive officers and directors of First Alachua have committed to vote their
shares in favor of the merger. CCBG holds no shares of First Alachua common
stock.
You are
entitled to one vote for each share of First Alachua common stock (whether Class
A or Class B) you own on the record date. Pursuant to Sections 607.1103 and
607.1004 of the Florida Business Corporation Act, both Class A common stock and
Class B common stock will vote together as a single voting group. Shareholders
holding a majority of the outstanding shares of First Alachua common stock
entitled to vote at the Special Meeting must be present, in person or by proxy,
at the Special Meeting to form a quorum. In order to approve the merger,
shareholders holding at least a majority of the outstanding shares of First
Alachua common stock must approve the Agreement and Plan of Merger.
Consequently, abstentions and broker non-votes, as well as instructions to
withhold authority to vote, will have the same effect as a vote “against” the
Agreement and Plan of Merger.
Failure either to vote by proxy or in person at the Special Meeting will
have the same effect as a vote cast “against” approval of the Agreement and Plan
of Merger and the transactions contemplated therein.
Persons
named as proxies will vote shares of First Alachua common stock in accordance
with the instructions on the proxies if such proxies are properly executed,
received in time, and not revoked. If the proxy does not contain instructions on
how to vote, persons named as proxies will vote for approval of the Agreement
and Plan of Merger. If any other matters properly come before the Special
Meeting, the persons named as proxies will vote upon such matters according to
their judgment. If necessary, such persons may vote in favor of a proposal to
adjourn the Special Meeting in order to permit further solicitation of proxies
in the event there are not sufficient votes to approve the Agreement and Plan of
Merger at the time of the Special Meeting. However, no proxy that is voted
against the approval of the Agreement and Plan of Merger will be voted in favor
of an adjournment of the Special Meeting in order to permit further solicitation
of proxies.
A First
Alachua shareholder who has given a proxy may revoke it at any time prior to its
exercise at the Special Meeting by:
· |
giving
written notice of revocation to the Secretary of First
Alachua; |
· |
properly
submitting to First Alachua a duly executed proxy bearing a later date;
or |
· |
attending
the Special Meeting and voting in person. |
All
written notices of revocation and other communications with respect to
revocation of proxies should be addressed as follows: First Alachua Banking
Corporation, 15000 NW 140th Street,
Alachua, Florida 32615, Attention: Jerry M. Smith, President.
At the
record date, all directors and executive officers of First Alachua as a group
(__ persons) were entitled to vote approximately ______ shares of First Alachua
common stock, constituting approximately ____% of the total number of shares of
First Alachua common stock outstanding at that date. The First Alachua directors
have committed to vote their shares of First Alachua common stock in favor of
the
Agreement
and Plan of Merger. See “BUSINESS OF FIRST ALACHUA - Management Stock
Ownership,” on page 68.
DESCRIPTION
OF THE MERGER
The
following information describes certain aspects of the merger. The Agreement and
Plan of Merger is included in this Proxy Statement/Prospectus in Section VIII,
beginning on page 147, and you are urged to read carefully the Agreement and
Plan of Merger in its entirety.
General
The
Holding Company Merger
Subject
to the terms and conditions of the Agreement and Plan of Merger, at the
effective time, First Alachua will merge with and into CCBG in accordance with
the provisions of, and with the effect provided in, Sections 607.1101, 607.1103,
607.1105, 607.1106 and 607.1107 of the Florida Business Corporation Act. CCBG
will be the surviving corporation resulting from this holding company merger and
will continue to be governed by the laws of the State of Florida.
The
Bank Merger
Subsequent
to the consummation of the holding company merger, First National Bank of
Alachua will be merged with and into Capital City Bank in accordance with the
provisions of and with the effect provided in Section 658.41 of the Florida
Statutes on terms and subject to the provisions of the Bank Plan of Merger,
included in this Proxy Statement/Prospectus in Section IX on page 211. First
Alachua, as the sole shareholder of First National Bank of Alachua, will vote
its shares in favor of the bank merger.
At the
effective time, and subject to any audit adjustments, each share of First
Alachua common stock outstanding immediately prior to the effective time will be
converted into and exchanged for the right to receive:
· |
approximately
71.176 shares of CCBG common stock, and |
Each
share of First National Bank of Alachua common stock issued and outstanding
immediately prior to the effective time will cease to be outstanding and will be
extinguished.
In the
event that the First Alachua audited financial statements provided to CCBG
indicate total shareholders’ equity, as that term is defined in accordance with
accounting principles generally accepted in the United States, as of September
30, 2004, to be less than $24,665,000, the difference obtained by subtracting
total shareholders’ equity (as determined by the auditor) from $24,665,000 will
be deemed to be audit adjustments to the First Alachua financial statements. The
total purchase price of $58,000,000 to be paid by CCBG for the First Alachua
common stock will be reduced by the amount of any audit adjustments.
If,
pursuant to the preceding paragraph, the opinion of First Alachua’s auditor with
respect to First Alachua’s audited financial statements is qualified and the
total capital is not readily determinable by the auditor, then the parties agree
to negotiate appropriate audit adjustments; provided, that, if the parties
cannot agree
as to the
amount of such audit adjustments within 30 days of the delivery of the auditor’s
audit opinion, CCBG may terminate the Agreement and Plan of Merger. In the event
that CCBG elects not to terminate the Agreement and Plan of Merger, then there
will be no audit adjustments.
As a
result, shareholders of First Alachua will become shareowners of CCBG, and CCBG
and Capital City Bank will conduct the business and operations of First Alachua
and First National Bank of Alachua, respectively.
Shares
held by First Alachua, CCBG, or their subsidiaries, other than shares held in a
fiduciary capacity or in satisfaction of debts previously contracted, will not
be exchanged for the right to receive either CCBG common stock or cash. Shares
held by First Alachua shareholders who perfect their dissenters’ rights of
appraisal will not be converted to CCBG common stock. The Agreement and Plan of
Merger provides that the exchange ratio will be adjusted to prevent dilution in
the event CCBG changes the number of shares of CCBG common stock issued and
outstanding prior to the effective time of the merger as a result of a stock
split, stock dividend, recapitalization, reclassification, or similar
transaction.
The
market value of the CCBG common stock that shareowners of First Alachua will
receive may vary significantly between the date of this Proxy
Statement/Prospectus and the effective time of the merger. Further, because CCBG
and First Alachua must satisfy various conditions, including receipt of
necessary regulatory approvals, the merger may not be consummated until a
substantial period of time following the Special Meeting. During the time
between the date of the Special Meeting and the effective time of the merger,
shareholders of First Alachua who do not properly perfect their dissenters’
rights of appraisal, or who do not sell their shares of First Alachua common
stock, will be subject to the risk of a decline in the market value of CCBG
common stock.
CCBG will
not issue fractional shares. Instead of issuing any fractional share to which
any First Alachua shareholder would otherwise be entitled upon consummation of
the merger, CCBG will pay such shareholder cash equal to the fractional part of
a share of CCBG common stock multiplied by the average daily closing price of
one share of CCBG common stock, as reported by the Nasdaq National Market, for
the 20 consecutive full trading days ending on and including the fifth full
trading day prior to the closing date of the merger.
In
addition, as a condition to the merger, First Alachua must have, immediately
prior to the effective date of the merger, a consolidated net worth of at least
$25,375,000, subject to certain adjustments. See “- Conditions to Consummation
of the Merger,” on page 37. Based on the last call report filed by First Alachua
with the FDIC, as of December 31, 2004, First Alachua had a net worth of
approximately $25.392 million.
At the
record date, First Alachua had 4,456 shares of Class A common stock and 5,730
shares of Class B common stock outstanding, for a total of 10,186 shares of
common stock. Based on the number of shares of First Alachua common stock
outstanding on the record date and the exchange ratio of approximately 71.176
shares, CCBG anticipates that it will issue approximately 725,000 shares of CCBG
common stock to holders of First Alachua common stock once the merger is
complete. Accordingly, CCBG would then have issued and outstanding approximately
__________ shares of CCBG common stock based on the number of shares of CCBG
common stock issued and outstanding on the record date. Following the merger,
and assuming no exercise of dissenters’ rights, the current shareholders of
First Alachua will beneficially own approximately ____% of the outstanding CCBG
common stock.
Background
of the Merger
First
Alachua has nearly a 100-year history of involvement in the Alachua County
community. Founded in 1908, First Alachua’s bank subsidiary, First National Bank
of Alachua, is the oldest continuously operating national bank in Florida and
the largest community bank operating in Alachua County. In 1971, a group of
investors led by current Chairman of the Board and President Jerry M. Smith
purchased a controlling interest in First National Bank of Alachua. In 1983, Mr.
Smith formed First Alachua Banking Corporation, with the bank as the sole
subsidiary.
In early
2004, Mr. Smith, as the Chief Executive Officer and controlling shareholder of
First Alachua, began to consider strategic alternatives for First Alachua,
primarily due to his concerns about management succession.
In April
2004, Mr. Smith contacted representatives of SunTrust Robinson Humphrey to
discuss possible strategic alternatives. On April 26, 2004, representatives of
SunTrust Robinson Humphrey met with Mr. Smith and certain members of his family.
The representatives of SunTrust Robinson Humphrey discussed the mergers and
acquisitions landscape in the State of Florida for banking institutions similar
to First Alachua, including the purchase price multiples that other transactions
had obtained. SunTrust Robinson Humphrey also discussed the potential partners
which might be interested in the markets and profile of First Alachua, as well
as the process and timing for a potential transaction.
In May
2004, SunTrust Robinson Humphrey provided First Alachua management a list of
materials which would be required in order to develop a confidential memorandum
describing the Company, including financial information. Management of First
Alachua and SunTrust Robinson Humphrey began gathering the appropriate
information and developing a confidential memorandum describing the Company that
could be distributed to potential interested parties.
On June
25, 2004, SunTrust Robinson Humphrey and First Alachua signed an engagement
letter whereby SunTrust Robinson Humphrey would (i) assist the board of
directors of the Company in its consideration of various strategic alternatives,
including determining whether a sale of the Company was advisable; (ii) identify
opportunities for sale; (iii) advise the Company concerning opportunities for
such sale; and (iv) participate on the Company’s behalf in negotiations
concerning any sale.
Upon
completion of the confidential memorandum, in mid-July 2004, SunTrust Robinson
Humphrey contacted 25 potential acquirers with respect to First Alachua. Nine
entities signed confidentiality agreements and requested the confidential
memorandum on First Alachua.
Two bids
were received with respect to an acquisition of First Alachua on August 26,
2004. One bid was received from CCBG and another bid was received from a larger
bank holding company headquartered outside the State of Florida in another
southeastern state. Mr. Smith reviewed the bids with SunTrust Robinson Humphrey.
After reviewing the bids, SunTrust Robinson Humphrey was instructed to contact
both prospective purchasers to ask each to consider enhancing their bids, which
they did. On September 2, 2004, CCBG submitted a nonbinding expression of
interest to acquire First Alachua, stating that CCBG was prepared to offer
$58,000,000 in a combination of 50% cash and 50% CCBG common stock for all of
the outstanding shares of First Alachua. The other bidder offered $58,000,000 to
be paid 100% in its stock as consideration for the purchase of the outstanding
shares of First Alachua. Both offers also contemplated an employment agreement
with Mr. Smith and change of control
payment
to Mr. Smith. After reviewing the revised bids from CCBG and the other bidder
with SunTrust Robinson Humphrey, Mr. Smith concluded that it would be preferable
to pursue a transaction with CCBG.
Due
diligence was commenced by CCBG in early October and the parties began the
process of negotiating the terms of a potential Agreement and Plan of Merger.
SunTrust Robinson Humphrey and First Alachua’s counsel conducted due diligence
on CCBG in October and November, with SunTrust Robinson Humphrey conducting
intensive due diligence with CCBG management in late November 2004.
The
parties continued due diligence and business and legal negotiations on the terms
of the Agreement and Plan of Merger through the month of November and into the
first few days of December 2004. As of December 3, 2004, it appeared that all
business and legal issues respecting the Agreement and Plan of Merger would be
resolved to both parties’ satisfaction. Mr. Smith then called a meeting of the
Board of Directors of First Alachua to apprise the directors of the potential
transaction with CCBG and its status. At the board meeting, including the
attendance of representatives of SunTrust Robinson Humphrey and First Alachua’s
legal counsel, Mr. Smith distributed drafts of the operative agreements, and
reviewed in detail the history leading up to the potential transaction. SunTrust
Robinson Humphrey and First Alachua’s counsel reviewed the terms of the
transaction as they had been negotiated to date. The Board of Directors of First
Alachua unanimously agreed to pursue the opportunity with CCBG. Mr. Smith
advised the directors that upon completion of final negotiations and drafting of
the definitive agreements, another meeting of the Board of Directors would be
called.
From
December 7, 2004 through January 31, 2005, management of the two companies and
their respective legal and financial advisors continued final negotiations of
the terms of the proposed Agreement and Plan of Merger.
On
February 3, 2005, the boards of directors of First Alachua and First National
held a joint special board meeting. Mr. Smith updated the directors on the
successful completion of the due diligence review of CCBG and the negotiation of
a definitive Agreement and Plan of Merger and ancillary agreements.
Representatives of First Alachua’s counsel, Smith, Gambrell & Russell, LLP,
reviewed the proposed definitive Agreement and Plan of Merger, together with all
exhibits, in detail. Representatives of SunTrust Robinson Humphrey reviewed with
the Boards of Directors its financial analysis of the merger and delivered its
oral fairness opinion, which was subsequently confirmed in writing, that, as of
the date of such opinion and based upon and subject to certain matters stated in
such opinion, the 71.176 shares of CCBG common stock and the $2,847.04 in cash
to be exchanged for each share of First Alachua common stock was fair from a
financial point of view to the holders of First Alachua common stock. Based upon
the value of the stock of CCBG on February 3, 2005, the total consideration per
share for purposes of the fairness opinion was $5,690.53 and the total aggregate
consideration was $57,963,750.
After
extensive discussion and deliberation, the boards of directors of First Alachua
and First National Bank of Alachua approved the Agreement and Plan of Merger and
authorized Mr. Smith to execute the agreement on behalf of both entities. The
officers of First Alachua and First National Bank of Alachua were authorized to
take such further action as necessary to consummate the merger, subject to the
required regulatory and shareholder approvals.
Immediately
following the conclusion of the joint board meeting, the parties entered into
the Agreement and Plan of Merger.
Our
Reasons for the Merger and Recommendation to First Alachua Shareholders
In
evaluating and determining to approve the Agreement and Plan of Merger, the
First Alachua Board of Directors, with the assistance of SunTrust Robinson
Humphrey and outside legal counsel, considered a variety of factors and based
their opinion as to the fairness of the transactions contemplated by the
Agreement and Plan of Merger primarily on the following factors:
· |
The
financial terms of the merger, including the value of the consideration
offered, the premium to book value paid, the ratio of CCBG’s offer price
to First Alachua’s earnings and the prices paid in comparable transactions
in Florida and the Southeastern United States over the last few
years. |
· |
The
future prospects of First Alachua and possible alternatives to the
proposed merger, including the prospects of continuing as an independent
institution. |
· |
The
opinion of SunTrust Robinson Humphrey that the merger consideration is
fair, from a financial point of view, to First Alachua’s
shareholders. |
· |
Information
with respect to the financial condition, results of operations, business
and prospects of First Alachua and the current industry, economic and
market conditions, as well as the risks associated with achieving those
prospects. |
· |
The
non-financial terms and structure of the Agreement and Plan of Merger and
the proposed merger, in particular, the fact that the merger would qualify
as a tax-free reorganization to First Alachua’s shareholders with respect
to the exchange of First Alachua stock for CCBG
stock. |
· |
The
business and financial condition and earnings prospects of CCBG, the
potential appreciation of CCBG common stock and the competence and
experience of CCBG management. |
· |
The
social and economic effects of the merger on First Alachua and its
employees, depositors, loan and other customers, creditors and other
constituencies of the communities in which First Alachua is located.
|
Each of
the above factors supports, directly or indirectly, the determination of the
First Alachua Board as to the fairness of the Agreement and Plan of Merger and
the related merger. This discussion of the information and factors considered by
the First Alachua Board of Directors in making its decision is not intended to
be exhaustive, but does include all material factors considered by the First
Alachua Board of Directors. The First Alachua Board did not quantify or attempt
to assign relative weights to the specific factors considered in reaching its
determination; however, the First Alachua Board placed special emphasis on the
consideration payable in the proposed merger and the receipt of a favorable
fairness opinion from its financial advisor. For additional information
regarding the fairness opinion, see “ - Summary of SunTrust Robinson Humphrey
Opinion to the Board of Directors of First Alachua.”
On
February 3, 2005, CCBG, First Alachua and First National Bank of Alachua
executed the Agreement and Plan of Merger. CCBG and First Alachua each conducted
a due diligence review of the material financial, operating and legal
information relating to the other party.
First
Alachua’s Board of Directors unanimously recommends that shareholders vote “FOR”
approval of the Agreement and Plan of Merger.
Summary
of SunTrust Robinson Humphrey Opinion to the Board of Directors of First
Alachua
First
Alachua has engaged SunTrust Robinson Humphrey as its financial advisor in
connection with the merger. At the February 3, 2005 meeting of the First Alachua
Board of Directors, SunTrust Robinson Humphrey reviewed with the Board its
financial analysis of the merger and delivered its oral opinion, which was
subsequently confirmed in writing, that, as of the date of such opinion and
based upon and subject to certain matters stated therein, the 71.176 shares, of
CCBG common stock and $2,847.04 in cash (collectively, the “Merger
Consideration”) to be exchanged for each share of First Alachua common stock
(other than certain shares specified in the Agreement and Plan of Merger) was
fair from a financial point of view to the holders of First Alachua common
stock.
The
full text of the opinion of SunTrust Robinson Humphrey, which sets forth the
assumptions made, matters considered and limitations on the review undertaken,
is included in this Proxy Statement/Prospectus in Section XI, beginning on page
225. The summary of the SunTrust Robinson Humphrey opinion described below is
qualified in its entirety by the full text of the SunTrust Robinson Humphrey
opinion. First Alachua shareholders are urged to read the opinion carefully and
in its entirety.
SunTrust
Robinson Humphrey’s opinion is directed to the Board of Directors of First
Alachua and relates only to the fairness from a financial point of view of the
exchange ratio to the holders of First Alachua common stock. SunTrust Robinson
Humphrey’s opinion does not address any other aspect of the merger and does not
constitute a recommendation to any shareholder as to how such shareholder should
vote at the First Alachua shareholders meeting. It addresses the aggregate
consideration to be received by the holders of First Alachua common stock as a
whole, without regard to size of holdings by individual shareholders, and does
not address the particular situations of specific
shareholders.
Material
and Information Considered with Respect to the Merger
In
arriving at its opinion, SunTrust Robinson Humphrey among other
things:
· |
reviewed
the January 31, 2005 draft of the Agreement and Plan of
Merger; |
· |
reviewed
certain publicly available business and historical financial information
and other data relating to the business and financial prospects of First
Alachua and CCBG, including certain publicly available consensus financial
forecasts and estimates of CCBG that were reviewed and discussed with the
management of CCBG; |
· |
reviewed
internal financial and operating information with respect to the business,
operations and prospects of First Alachua furnished to SunTrust Robinson
Humphrey by First Alachua that is not publicly
available; |
· |
reviewed
the reported prices and trading activity of CCBG’s common stock and
compared those prices and activity with other publicly-traded companies
that SunTrust Robinson Humphrey deemed
relevant; |
· |
compared
the historical financial results and present financial condition of First
Alachua and CCBG and, for CCBG only, compared stock market data, with
those of publicly traded companies that SunTrust Robinson Humphrey deemed
relevant; |
· |
reviewed
certain pro forma effects of the merger on CCBG’s financial statements and
potential benefits of the merger and discussed these items with the
management of First Alachua and CCBG; |
· |
compared
the financial terms of the merger with the publicly available financial
terms of certain other recent transactions that SunTrust Robinson Humphrey
deemed relevant; |
· |
conducted
discussions with members of the management of First Alachua and CCBG
concerning their respective businesses, operations, assets, present
condition and future prospects; and |
· |
undertook
such other studies, analyses and investigations, and considered such
information, as SunTrust Robinson Humphrey deemed
appropriate. |
SunTrust
Robinson Humphrey assumed and relied upon, without independent verification, the
accuracy and completeness of all of the financial and other information
discussed with or reviewed by it in arriving at its opinion. With respect to the
financial forecasts, estimates, pro forma effects and estimates of synergies and
other potential benefits of the merger provided to or discussed with it,
SunTrust Robinson Humphrey assumed, at the direction of the management of First
Alachua and without independent verification or investigation, that they have
been reasonably prepared on bases reflecting the best currently available
information, estimates and judgments of the management of First Alachua and CCBG
and are otherwise reasonable. SunTrust Robinson Humphrey also assumed with the
approval of First Alachua that the future financial results referred to in its
opinion that were provided to it by First Alachua will be achieved, and that the
synergies and other potential benefits of the merger will be realized, at the
times and in the amounts estimated by the management of First
Alachua.
In
arriving at its opinion, SunTrust Robinson Humphrey did not conduct a physical
inspection of the properties and facilities of First Alachua. SunTrust Robinson
Humphrey did not review individual credit files nor did it make any independent
evaluation or appraisal of any of the assets or liabilities (including any
contingent, derivative or off-balance-sheet assets or liabilities) of First
Alachua or CCBG or any of their respective subsidiaries, and SunTrust Robinson
Humphrey was not furnished with any such evaluation or appraisal. SunTrust
Robinson Humphrey is not an expert in the evaluation of loan and lease
portfolios for purposes of assessing the adequacy of the allowances for losses
with respect to such portfolios and, accordingly, SunTrust Robinson Humphrey
assumed that First Alachua’s and CCBG’s allowances for losses are in the
aggregate adequate to cover those losses.
The
SunTrust Robinson Humphrey opinion is necessarily based upon market, economic
and other conditions as they existed on and could be evaluated as of, the date
of its opinion. SunTrust Robinson Humphrey’s opinion does not address the
relative merits of the merger as compared to other business strategies or
transactions that might be available to First Alachua or First Alachua’s
underlying business decision to effect the merger. SunTrust Robinson Humphrey
was not asked to, nor did it, offer any opinion as to any terms or conditions of
the Agreement and Plan of Merger or the form of the merger (other than the
Merger Consideration). The financial markets in general and the market for the
common stock of First Alachua and
CCBG, in
particular, are subject to volatility, and SunTrust Robinson Humphrey’s opinion
did not address potential developments in the financial markets or what the
value of CCBG common stock will be when issued pursuant to the Agreement and
Plan of Merger or the prices at which it will trade or otherwise be transferable
at any time.
For
purposes of its opinion, SunTrust Robinson Humphrey assumed that:
· |
the
Agreement and Plan of Merger does not differ in any respect from the draft
it examined and that CCBG and First Alachua will comply in all material
respects with the terms of the Agreement and Plan of Merger and the
transaction will be consummated in accordance with its terms without
waiver, modification or amendment of any material term, condition or
agreement; |
· |
the
merger will be treated as a tax-free reorganization for federal income tax
purposes; and |
· |
all
material governmental, regulatory or other consents and approvals
necessary for the consummation of the merger will be obtained without any
adverse effect on First Alachua or CCBG or on the expected benefits of the
merger. |
Subsequent
developments may affect SunTrust Robinson Humphrey’s opinion and SunTrust
Robinson Humphrey does not have any obligation to update or revise its opinion.
In
preparing its opinion, SunTrust Robinson Humphrey performed a variety of
financial and comparative analyses, a summary of which is described below. The
summary is not a complete description of the analyses underlying SunTrust
Robinson Humphrey’s opinion or the presentation made to First Alachua’s Board,
but summarizes the material analyses performed and presented in connection with
its opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular
circumstances and, therefore, is not readily susceptible to summary description.
Accordingly, SunTrust Robinson Humphrey believes that its analyses must be
considered as an integrated whole and that selecting portions of its analyses
and factors, without considering all analyses and factors, or focusing on
information in tabular format, could create a misleading or incomplete view of
the processes underlying such analyses and SunTrust Robinson Humphrey’s opinion.
In
performing its analyses, SunTrust Robinson Humphrey made numerous assumptions
with respect to First Alachua, CCBG, industry performance and general business,
economic, market and financial conditions, many of which are beyond the control
of First Alachua and CCBG. The estimates contained in these analyses and the
valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by such analyses.
In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, these analyses and estimates are
inherently subject to substantial uncertainty.
SunTrust
Robinson Humphrey’s opinion and analyses were only one of many factors
considered by the First Alachua Board of Directors in its evaluation of the
merger and should not be viewed as determinative of the views of the First
Alachua Board of Directors or management of First Alachua with respect to the
merger or the consideration to be received by First Alachua in the merger. The
Merger
Consideration
was determined on the basis of negotiations between First Alachua and CCBG. In
arriving at its opinion, SunTrust Robinson Humphrey did not attribute any
particular weight to any analyses or factors considered by it and did not form
an opinion as to whether any individual analysis or factor (positive or
negative) supported or failed to support its opinion. Rather, SunTrust Robinson
Humphrey arrived at its ultimate opinion based on the results of all analyses
undertaken by it and assessed as a whole and believes that the totality of the
factors considered and analysis it performed in connection with its opinion
operated collectively to support its determination as to the fairness of the
exchange ratio from a financial point of view. First Alachua’s decision to enter
into the merger was made solely by the First Alachua Board of Directors and not
as a result of a recommendation by SunTrust Robinson Humphrey.
The
following is a summary of the material financial and comparative analyses
presented by SunTrust Robinson Humphrey in connection with its opinion to the
First Alachua Board of Directors. The summary includes information presented in
a tabular format. In order to understand fully the financial analyses, these
tables must be read together with the accompanying text. The tables alone do not
constitute a complete description of the financial analyses.
Summary
of Merger Consideration
Shareholders
of First Alachua in the aggregate will receive 725,000 shares of CCBG common
stock and $29.0 million in cash. Based on the 10,186 shares of First Alachua
common stock outstanding as of February 3, 2005, each shareholder of First
Alachua would receive approximately 71.176 shares of CCBG common stock and
$2,847.04 in cash for each share of First Alachua common stock that it owns.
Based on the last trading price of CCBG common stock on February 3, 2005 of
$39.95, the value of the shares of CCBG common stock to be received in exchange
for each share of First Alachua common stock was $2,843.48 and the total Merger
Consideration per share for purposes of the SunTrust Robinson Humphrey opinion
was $5,690.53.
Analysis
of First Alachua
Analysis
of Selected Publicly-Traded Reference Companies
SunTrust
Robinson Humphrey reviewed and compared publicly available financial data,
market information and trading multiples for First Alachua with other selected
publicly-traded banks and thrifts located in the State of Florida that SunTrust
Robinson Humphrey deemed relevant to First Alachua.
Atlantic
BancGroup, Inc. (ATBC)
BankAtlantic
Bancorp, Inc. (BBX)
BankUnited
Financial Corporation (BKUNA)
Capital
City Bank Group, Inc. (CCBG)
Centerstate
Banks of Florida, Inc. (CSFL)
Commercial
Bankshares, Inc. (CLBK)
Federal
Trust Corporation (FDT)
Fidelity
Bankshares, Inc. (FFFL)
First
Community Bank Corporation of America (FCFL)
First
National Bancshares, Inc. (FBMT)
Harbor
Florida Bancshares, Inc. (HARB)
Jacksonville
Bancorp, Inc. (JAXB)
Seacoast
Banking Corporation of Florida, Inc. (SBCF)
TIB
Financial Corp. (TIBB)
For the
selected publicly-traded reference companies, SunTrust Robinson Humphrey
analyzed, among other things, stock price as a multiple of calendar year 2004
and projected calendar year 2005 earnings per share, book value per share,
tangible book value per share and assets to market capitalization. All multiples
were based on closing stock prices as of February 1, 2005. Projected earnings
per share for the reference companies were based on First Call consensus
estimates. First Call is an information provider that publishes a compilation of
estimates of projected financial performance for publicly-traded companies
produced by equity research analysts at leading investment banking firms. The
following tables set forth the median multiples indicated by the market analysis
of selected publicly-traded reference companies compared to multiples based upon
the implied Merger Consideration of $5,690.53 per share:
|
|
Peer
Median |
|
|
|
Merger |
|
|
Market
Price to: |
|
|
|
|
|
|
|
|
Calendar
2004 EPS |
|
21.0 |
|
x |
|
21.8 |
|
x |
Calendar
2005 EPS |
|
18.2 |
|
|
|
18.8 |
|
|
Book
Value Per Share |
|
2.5 |
|
|
|
2.3 |
|
|
Tangible
Book Value Per Share |
|
2.6 |
|
|
|
2.4 |
|
|
Assets/Market
Capitalization |
|
20.8 |
% |
|
|
25.0 |
% |
|
SunTrust
Robinson Humphrey noted that none of the companies used in the market analysis
of selected publicly-traded companies was identical to First Alachua and that,
accordingly, the analysis necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies reviewed and other factors that would affect the market values of
the selected publicly-traded companies.
Analysis
of Selected Merger and Acquisition Transactions
SunTrust
Robinson Humphrey reviewed and analyzed the financial terms, to the extent
publicly available and deemed relevant by SunTrust Robinson Humphrey, for all
completed and pending mergers and acquisitions involving banks and thrifts in
the State of Florida involving a transaction value of between $10.0 million and
$100.0 million that were announced between January 1, 1995 and February 1, 2005.
The universe included 110 reference transactions.
For the
selected transactions, SunTrust Robinson Humphrey analyzed, among other things,
acquisition price as a multiple of latest twelve months earnings per share, book
value per share, tangible book value per share, adjusted tangible book value per
share and total assets. SunTrust Robinson Humphrey calculated adjusted tangible
book value per share by adjusting the tangible equity to tangible assets ratio
for each of the target banks and thrifts in the reference transactions to equal
10.5%, the tangible equity to tangible assets ratio of First Alachua as of
December 31, 2004. All multiples for the selected transactions were based on
publicly available information at the time of announcement of the relevant
transaction. The following tables set forth the median multiples indicated by
this analysis compared to multiples based upon the implied Merger Consideration
of $5,690.53 per share:
|
Reference
Transactions Median |
|
|
Merger |
|
|
Market
Price to: |
|
|
|
|
|
|
LTM
EPS |
22.1 |
|
x |
|
21.8 |
|
x |
Book
Value Per Share |
2.4 |
|
|
|
2.3 |
|
|
Tangible
Book Value Per Share |
2.5 |
|
|
|
2.4 |
|
|
Adjusted
Tangible Book Value Per Share |
2.2 |
|
|
|
2.4 |
|
|
Total
Assets |
20.0 |
% |
|
|
25.0 |
% |
|
SunTrust
Robinson Humphrey noted that no transaction considered in the analysis of
selected merger and acquisition transactions is identical to the merger and may
differ significantly from the merger based on, among other things, the size of
the transactions, the structure of the transactions and the dates that the
transactions were announced and consummated. All multiples for the selected
transactions were based on public information available at the time of
announcement of such transaction, without taking into account differing market
and other conditions during the period during which the selected transactions
occurred.
Dividend
Discount Analysis
SunTrust
Robinson Humphrey performed a dividend discount analysis based upon projections
provided by First Alachua’s management for the fiscal years ending December 31,
2005 through 2009 to estimate the net present equity value per share of First
Alachua. SunTrust Robinson Humphrey discounted five years of estimated cash
flows for First Alachua, assuming a dividend rate sufficient to maintain an
equity capital ratio (defined as equity divided by assets) of 8.00% and using a
range of discount rates from 14% to 16%. In order to derive the terminal value
of First Alachua’s earnings stream beyond 2009, SunTrust Robinson Humphrey
assumed terminal value multiples of fiscal year 2009 earnings per share ranging
from 16.0x to 18.0x. The present value of this terminal amount was then
calculated based on the range of discount rates mentioned above. These rates and
values were chosen to reflect different assumptions regarding the required rates
of return of holders or prospective buyers of First Alachua common stock. This
analysis yielded a range of stand-alone values for First Alachua common stock of
between $4,840.80 and $5,678.80 per share, with a median value of $5,245.20 per
share.
Analysis
of CCBG
Analysis
of Selected Publicly-Traded Reference Companies
SunTrust
Robinson Humphrey reviewed and compared publicly available financial data,
market information and trading multiples for CCBG with other selected
publicly-traded reference companies that SunTrust Robinson Humphrey deemed
relevant to CCBG. These companies are:
Alabama
National BanCorporation (ALAB)
BankAtlantic
Bancorp, Inc. (BBX)
BankUnited
Financial Corporation (BKUNA)
Fidelity
Bankshares, Inc. (FFFL)
Main
Street Banks, Inc. (MSBK)
Seacoast
Banking Corporation of Florida (SBCF)
United
Community Banks, Inc. (UCBI)
For the
selected publicly-traded reference companies, SunTrust Robinson Humphrey
analyzed, among other things, stock price as a multiple of calendar year 2004
and projected calendar year 2005 earnings per share, book value per share,
tangible book value per share and assets as a percentage of total market
capitalization. All multiples were based on closing stock prices as of February
1, 2005. Projected earnings per share for the reference companies were based on
First Call consensus estimates. The following table sets forth the median
multiples indicated by the market analysis of selected publicly-traded reference
companies:
|
|
|
|
|
|
Reference
Companies Median |
|
|
Market
Price to: |
|
|
|
|
|
|
|
|
Calendar
2004 EPS |
|
21.0 |
|
x |
|
20.4 |
|
x |
Calendar
2005E EPS |
|
18.2 |
|
|
|
17.1 |
|
|
Book
Value Per Share |
|
2.2 |
|
|
|
2.5 |
|
|
Tangible
Book Value Per Share |
|
3.2 |
|
|
|
3.0 |
|
|
Assets/Market
Capitalization |
|
23.5 |
% |
|
|
19.4 |
% |
|
SunTrust
Robinson Humphrey noted that none of the companies used in the market analysis
of selected publicly-traded companies was identical to CCBG and that,
accordingly, the analysis necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies reviewed and other factors that would affect the market values of
the selected publicly-traded companies.
Dividend
Discount Analysis
SunTrust
Robinson Humphrey performed a dividend discount analysis based upon projections
provided by First Call for the fiscal years ending December 31, 2005 and 2006
and based upon net income growth and asset growth of 8% and 10%, respectively,
for the fiscal years ending December 31, 2007, 2008 and 2009 to estimate the net
present equity value per share of CCBG. Net income growth for the years ending
December 31, 2007, 2008 and 2009 was based upon consensus five year projected
growth estimates for CCBG provided by First Call. SunTrust Robinson Humphrey
discounted five years of estimated cash flows for CCBG using a range of discount
rates from 10% to 12%. In order to derive the terminal value of CCBG’s earnings
stream beyond 2009, SunTrust Robinson Humphrey assumed terminal value multiples
of fiscal year 2009 earnings per share ranging from 16.0x to 18.0x. The present
value of this terminal amount was then calculated based on the range of discount
rates mentioned above. These rates and values were chosen to reflect different
assumptions regarding the required rates of return of holders or prospective
buyers of CCBG common stock. This analysis yielded a range of stand-alone values
for CCBG common stock of between $34.88 and $41.39 per share, with an median
value of $38.02 per share. SunTrust
Robinson Humphrey noted as part of its analysis that CCBG’s closing stock price
on February 3, 2005 was $39.95 per share.
Other
Factors and Analyses
SunTrust
Robinson Humphrey took into consideration various other factors and analyses,
including: historical market prices and trading volumes for CCBG’s common stock;
movements in the common stock of selected publicly-traded companies; movements
in the S&P Bank Index; and analyses of the costs of equity of each of First
Alachua and CCBG.
Information
Regarding SunTrust Robinson Humphrey
The First
Alachua Board of Directors selected SunTrust Robinson Humphrey to act as its
financial advisor and render a fairness opinion regarding the merger because
SunTrust Robinson Humphrey is a nationally recognized investment banking firm
with substantial experience in transactions similar to the merger and because it
is familiar with First Alachua, its business and its industry. SunTrust Robinson
Humphrey is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, secondary distributions of listed and unlisted
securities and private placements.
Pursuant
to a letter agreement dated June 25, 2004, First Alachua paid SunTrust Robinson
Humphrey an opinion fee of $75,000 upon the signing of the Agreement and Plan of
Merger. In addition, First Alachua has agreed to pay SunTrust Robinson Humphrey
a financial advisory fee at closing of the merger equal to 1.25% of the
aggregate consideration to be received pursuant to the merger, less amounts
previously received. Based on the current market price of CCBG common stock as
of the date of this document, the additional fee payable to SunTrust Robinson
Humphrey under the preceding formula would be $______. In addition, First
Alachua has agreed to reimburse SunTrust Robinson Humphrey for its reasonable
out of pocket expenses and to indemnify SunTrust Robinson Humphrey and certain
related persons against certain liabilities arising out of or in conjunction
with its rendering of services under its engagement, including certain
liabilities under the federal securities laws. In the ordinary course of its
business, SunTrust Robinson Humphrey and its affiliates may actively trade in
the debt and equity securities of CCBG for its own account and the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities. In addition, SunTrust Robinson Humphrey and its affiliates
(including SunTrust Banks, Inc.) may have other financing and business
relationships with First Alachua or CCBG in the ordinary course of
business.
CCBG’s
Reasons for the Merger
The CCBG
Board of Directors believes that the merger is in the best interests of CCBG and
its shareowners. The CCBG Board of Directors has unanimously approved the
Agreement and Plan of Merger. In deciding to approve the Agreement and Plan of
Merger, the CCBG Board of Directors considered a number of factors,
including:
· |
a
review, based in part on a presentation by CCBG’s management,
of |
|
- |
the
business, operations, earnings, and financial condition, including the
capital levels and asset quality, of First Alachua on historical,
prospective, and pro forma bases and in comparison to other financial
institutions in the area, |
|
- |
the
demographic, economic, and financial characteristics of the Alachua County
and St. Johns County, Florida markets, including existing competition,
history of the market areas with respect to financial institutions, and
average demand for credit, on historical and prospective bases, and
|
|
- |
the
results of CCBG’s due diligence review of First Alachua;
|
· |
the
likelihood of regulators approving the merger without undue conditions or
delay; |
· |
the
compatibility and the community bank orientation of both CCBG and its
subsidiary and First Alachua; |
· |
that
the merger will provide CCBG with significant opportunities to market its
fee based products, such as cash management, asset management and
securities products to the existing customers of First
Alachua; |
· |
that
after the merger, First Alachua will be able to draw upon the resources
and competencies of CCBG and Capital City Bank to provide a broader range
of services and product delivery channels;
and |
· |
a
variety of factors affecting and relating to the overall strategic focus
of CCBG. |
While
CCBG’s Board of Directors considered the foregoing and other factors, the Board
of Directors did not assign any specific or relative weights to the factors
considered and did not make any determination with respect to any individual
factor. CCBG’s Board of Directors collectively made its determination with
respect to the merger based on the unanimous conclusion reached by its members,
in light of the factors that each of them considered appropriate, that the
merger is in the best interests of CCBG’s shareowners.
The terms
of the merger, including the exchange ratio, were the result of arm’s-length
negotiations between representatives of CCBG and representatives of First
Alachua. Based upon its consideration of the foregoing factors, the Board of
Directors of CCBG approved the Agreement and Plan of Merger and the merger as
being in the best interests of CCBG and its shareowners.
Effective
Time of the Merger
The
effective time of the merger will occur on the date and at the time the Articles
of Merger reflecting the holding company merger become effective with the
Secretary of State of the State of Florida. Unless First Alachua and CCBG
otherwise agree in writing, and subject to the conditions to the obligations of
CCBG and First Alachua to effect the merger, the parties will use their
reasonable efforts to cause the effective time of the merger to occur at a
mutually-agreed upon time within 60 days after the last to occur
of:
· |
the
effective date (including expiration of any applicable waiting period) of
the last required consent of any regulatory authority having authority
over and approving or exempting the merger,
and |
· |
the
date on which the shareholders of First Alachua approve the Agreement and
Plan of Merger. |
CCBG and
First Alachua cannot assure that they can obtain the necessary regulatory
approvals or that they can or will satisfy the other conditions to the merger.
CCBG and First Alachua anticipate that they will satisfy all conditions to
consummation of the merger so that the merger can be completed during the second
quarter of 2005. However, delays in the consummation of the merger could
occur.
The Board
of Directors of either CCBG or First Alachua may terminate the Agreement and
Plan of Merger if the merger is not consummated by August 31, 2005, unless
the failure to consummate the merger by that date is the result of a breach of
the Agreement and Plan of Merger by the party seeking termination. See “-
Conditions
to Consummation of the Merger,” on page 37 and “- Waiver, Amendment, and
Termination,” on page 39.
Distribution
of CCBG Stock Certificates
Promptly
after the effective time of the merger, CCBG will mail to each holder of record
of First Alachua common stock appropriate transmittal materials and instructions
for the exchange of First Alachua stock certificates for CCBG stock certificates
and the cash portion of the consideration.
Holders
of First Alachua common stock should NOT send in their First Alachua stock
certificates until they receive the transmittal materials and
instructions.
After
CCBG’s exchange agent receives your First Alachua stock certificates and
properly completed transmittal materials, the Exchange Agent will issue and mail
to you a certificate representing the number of shares of CCBG common stock to
which you are entitled. The Exchange Agent will also send First Alachua
shareholders a check for the amount to be paid, without interest for the cash
portion of the consideration, for any fractional shares and for all undelivered
dividends or distributions in respect of such shares.
After the
effective time of the merger, to the extent permitted by law, holders of First
Alachua common stock of record as of the effective time of the merger will be
entitled to vote at any meeting of CCBG shareowners the number of whole shares
of CCBG common stock they will receive in the merger, regardless of whether such
shareholders have surrendered their First Alachua stock certificates. Whenever
CCBG declares a dividend or other distribution on CCBG common stock, the record
date for which is at or after the effective time of the merger, the declaration
will include dividends or other distributions on all shares issuable pursuant to
the Agreement and Plan of Merger. However,
CCBG will not pay any dividend or other distribution payable after the effective
time of the merger with respect to CCBG common stock to the holder of any
unsurrendered First Alachua stock certificate until the holder duly surrenders
such First Alachua stock certificate. In no
event will the holder of any surrendered First Alachua stock certificate(s) be
entitled to receive interest on any cash to be issued to such holder, except to
the extent required in connection with dissenters’ rights. In no event will CCBG
or the Exchange Agent be liable to any holder of First Alachua common stock for
any amounts paid or property delivered in good faith to a public official
pursuant to any applicable abandoned property, escheat, or similar
law.
After the
effective time of the merger, no transfers of shares of First Alachua common
stock on First Alachua’s stock transfer books will be recognized. If First
Alachua stock certificates are presented for transfer after the effective time
of the merger, they will be canceled and exchanged for shares of CCBG common
stock and a check for the cash portion of the consideration to be received in
the merger and the amount due in lieu of a fractional share, if
any.
After the
effective time of the merger, holders of First Alachua stock certificates will
have no rights with respect to the shares of First Alachua common stock other
than the right to surrender such First Alachua stock certificates and receive in
exchange the shares of CCBG common stock and the cash portion to be received in
the merger to which such holders are entitled. After the effective time of the
merger, holders of First Alachua stock certificates who have complied with the
provisions regarding the right to dissent (as detailed in the Florida Business
Corporation Act), may be entitled to receive the fair value of such
shareholder’s shares of First Alachua common stock in cash, determined
immediately prior to the
merger,
excluding any appreciation or depreciation in anticipation of the merger.
Failure
to comply with the procedures prescribed by applicable law will result in the
loss of dissenters’ rights of appraisal. A copy
of the dissenters’ rights of appraisal statute under the Florida Business
Corporation Act is set forth in this Proxy Statement/Prospectus in Section X on
page 213.
Conditions
to Consummation of the Merger
Consummation
of the merger is subject to various conditions, including:
· |
the
approval of the Agreement and Plan of Merger by the holders of a majority
of the outstanding First Alachua common
stock; |
· |
the
receipt of all regulatory approvals required for consummation of the
merger (see “- Regulatory Approvals,” on page
38); |
· |
receipt
of all consents required for consummation of the merger or for the
prevention of any default under any contract or permit which consent, if
not obtained, is reasonably likely to have, individually or in the
aggregate, a material adverse effect; |
· |
the
absence of any law or order, whether temporary, preliminary or permanent,
or any action taken by any court, governmental, or regulatory authority of
competent jurisdiction prohibiting, restricting, or making illegal the
consummation of the transactions contemplated by the Agreement and Plan of
Merger; |
· |
the
Registration Statement, of which this Proxy Statement/Prospectus forms a
part, being declared effective by the SEC and the receipt of all necessary
SEC and state approvals relating to the issuance or trading of the shares
of CCBG common stock issuable pursuant to the Agreement and Plan of
Merger; |
· |
the
approval of the CCBG common stock issuable pursuant to the Agreement and
Plan of Merger for listing on the Nasdaq National
Market; |
· |
the
receipt of a written opinion from counsel for each of CCBG and First
Alachua as to the tax aspects of the merger, including that the merger
will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code; |
· |
the
accuracy, in all material respects, as of the date of the Agreement and
Plan of Merger and as of the effective time of the merger, of the
representations and warranties of First Alachua and CCBG as set forth in
the Agreement and Plan of Merger; |
· |
the
performance of all agreements and the compliance with all covenants of
First Alachua and First National Bank of Alachua and CCBG as set forth in
the Agreement and Plan of Merger; |
· |
the
receipt by CCBG and First Alachua of certain required written opinions of
counsel; |
· |
the
receipt by CCBG of agreements from each person First Alachua reasonably
believes may be deemed an affiliate of First Alachua with respect to
certain matters; |
· |
First
Alachua must have, immediately prior to the effective time, a consolidated
minimum net worth of at least $25,375,000, provided that “net worth” (a)
shall not be reduced by fees, costs and expenses (i) incurred or paid by
First Alachua in connection with the execution and performance of the
Agreement and Plan of Merger up to a maximum amount of $1,100,000 or (ii)
incurred or paid at the request of CCBG, and (b) shall be reduced for
adjustments requested by CCBG for purposes of complying with accounting
principles generally accepted in the United States and adjustments for
purposes of booking any audit adjustments to First Alachua’s audited
financial statements and for purposes of establishing First Alachua’s
allowance for loan losses; |
· |
the
delivery to CCBG by each First Alachua and First National Bank of Alachua
director of a Director and Voting
Agreement; |
· |
the
receipt by CCBG of letters from each director and executive officer of
First Alachua and First National Bank of Alachua releasing any claims they
may have against either First Alachua or First National Bank of
Alachua; |
· |
the
delivery to CCBG by First Alachua and First National Bank of Alachua of
any required clearance certificate or similar document required by any
state taxing authority in order to relieve CCBG of any obligation to
withhold any portion of the consideration under the Agreement and Plan of
Merger; |
· |
CCBG
shall have received an executed Executive Employment Agreement from Jerry
M. Smith; |
· |
CCBG
shall have received an executed letter agreement from Jerry M. Smith;
and |
· |
First
Alachua and First National shall have received from CCBG an agreement
related to the First Alachua Executive Indexed Salary Continuation
Plan. |
CCBG and
First Alachua cannot assure you when or if all of the conditions to the merger
can or will be satisfied. In the event the merger is not completed by August 31,
2005, the Agreement and Plan of Merger may be terminated and the merger
abandoned by either First Alachua or CCBG, unless the failure to consummate the
merger by that date is the result of a breach of the Agreement and Plan of
Merger by the party seeking termination. See “- Waiver, Amendment, and
Termination,” on page 39.
Regulatory
Approvals
CCBG and
First Alachua cannot complete the merger unless and until they receive
regulatory approvals from the Federal Reserve Board and the Florida Department
of Financial Services. These regulators will evaluate financial, managerial and
competitive criteria, as well as the supervisory history of the parties and the
public benefits of the merger. CCBG and First Alachua have filed all required
regulatory applications relating to the merger. CCBG and First Alachua cannot
assure when or whether they will receive the required regulatory approvals.
Additionally, the parties cannot assure that the regulatory approvals will
impose no conditions or restrictions that in the judgment of their Boards of
Directors would so adversely
impact
the economic or business benefits of the merger that, had such conditions or
restrictions been known, the parties would not have entered into the Agreement
and Plan of Merger.
CCBG and
First Alachua are not aware of any other material governmental approvals or
actions that are required for consummation of the merger.
Waiver,
Amendment, and Termination
To the
extent permitted by applicable law, First Alachua and CCBG may amend the
Agreement and Plan of Merger by written agreement at any time, whether before or
after approval of the Agreement and Plan of Merger by the First Alachua
shareholders. After the First Alachua shareholders approve the Agreement and
Plan of Merger, the Agreement and Plan of Merger cannot be amended in a way that
reduces or modifies the consideration to be received by the holders of First
Alachua common stock without further approval of First Alachua shareholders. In
addition, after the First Alachua shareholders approve the Agreement and Plan of
Merger, the provisions of the Agreement and Plan of Merger relating to the
manner or basis in which shares of First Alachua common stock will be exchanged
for shares of CCBG common stock cannot be amended in a manner adverse to the
holders of CCBG common stock without any requisite approval of CCBG shareowners
entitled to vote on such an amendment. In addition, prior to or at the effective
time of the merger, either First Alachua or CCBG, or both, acting through their
respective Boards of Directors, chief executive officers or other authorized
officers, may:
· |
waive
any default in the performance of any term of the Agreement and Plan of
Merger by the other party; |
· |
waive
or extend the time for the compliance or fulfillment by the other party of
any and all of its obligations under the Agreement and Plan of Merger;
and |
· |
waive
any of the conditions precedent to the obligations of such party under the
Agreement and Plan of Merger, except any condition that, if not satisfied,
would result in the violation of any applicable law or governmental
regulation. |
No such
waiver will be effective unless written and unless signed by a duly authorized
officer of First Alachua or CCBG, as the case may be.
The
Agreement and Plan of Merger may be terminated at any time prior to the
effective time of the merger:
· |
by
the mutual agreement of CCBG and First
Alachua; |
· |
by
CCBG or First Alachua: |
|
- |
in
the event of any material breach of any representation or warranty of the
other party contained in the Agreement and Plan of Merger which cannot be
or has not been cured within 30 days after written notice to the breaching
party and which breach is reasonably likely, in the opinion of the
non-breaching party, to have, individually or in the aggregate, a material
adverse effect on the breaching party (provided that the terminating party
is not then in material breach of any representation, warranty, covenant,
or other agreement contained in the Agreement and Plan of
Merger), |
|
- |
in
the event of any material breach of any covenant or agreement of the other
party contained in the Agreement and Plan of Merger which cannot be or has
not been cured within 30 days after written notice to the breaching
party, |
|
- |
if
any approval of any regulatory authority required for consummation of the
merger has been denied by final nonappealable action, or if any action
taken by such authority is not appealed within the time limit for appeal,
|
|
- |
if
the shareholders of First Alachua fail to approve the Agreement and Plan
of Merger at the Special Meeting, |
|
- |
if
the merger is not consummated by August 31, 2005, provided that the
failure to consummate is not due to a breach by the party electing to
terminate, or |
|
- |
in
the event that any of the conditions precedent to the obligations of such
party to consummate the merger cannot be satisfied or fulfilled by August
31, 2005, provided that the terminating party is not then in material
breach of any representation, warranty, covenant, or other agreement
contained in the Agreement and Plan of
Merger; |
· |
by
CCBG, in the event that the Board of Directors of First Alachua or First
National Bank of Alachua does not reaffirm its approval of the Agreement
and Plan of Merger (excluding any other acquisition proposal from a third
party), or shall have resolved not to reaffirm the merger, or shall have
affirmed, recommended or authorized entering into any acquisition proposal
or other transaction involving a merger, share exchange, consolidation or
transfer of substantially all of the assets of First
Alachua; |
· |
by
CCBG if the audit opinion of First Alachua’s auditor is qualified and the
total capital of First Alachua as of September 30, 2004 cannot be readily
determinable by First Alachua’s auditor, and if CCBG and First Alachua
cannot agree upon appropriate audit adjustments within 30 days of delivery
of First Alachua’s auditor’s audit opinion;
|
· |
by
First Alachua at any time during the two-day period commencing at the
close of trading on the fifth full trading day prior to the closing date,
if both (i) the average of the daily closing prices of one share of CCBG
common stock (as reported by the Nasdaq National Market) for the 20
consecutive full trading days ending on and including the fifth full
trading day prior to the closing date is less than or equal to $34, and
(ii) the quotient obtained by dividing the average closing price of one
share of CCBG common stock (as calculated above) by 40 is less than the
number obtained by subtracting 0.15 from the quotient obtained by dividing
(x) the weighted average of the closing prices of an index group of 22
bank holding companies at the close of trading on the fifth full trading
day prior to the closing date by (y) the weighted average of the closing
prices of the index group on February 2, 2005 (the day before the
Agreement and Plan of Merger was executed). However, if First Alachua
elects to exercise this termination right, then it must give prompt
written notice to CCBG (and provided that this notice of election to
terminate may be withdrawn at any time within the two-day termination
period). During the three-day period beginning with its receipt of the
notice of election to terminate, CCBG has the option of adjusting the
number of shares of CCBG common stock to be issued per share of First
Alachua common stock accordingly. If CCBG makes this
|
|
election, it shall give prompt written notice to First
Alachua. In that event, the Agreement and Plan of Merger will remain in
effect in accordance with its terms (except for the share exchange ratio);
and |
· |
by
CCBG in the event of a First Alachua material adverse effect, and, if CCBG
provides notice of and grants time to cure such material adverse effect,
such material adverse effect is not cured to CCBG’s satisfaction within
the time frame specified in the
notice. |
In
addition to any other payments required by the Agreement and Plan of Merger, in
the event that the Agreement and Plan of Merger is terminated as a result of
First Alachua or the holders of at least a majority of the shares of First
Alachua common stock entering into an agreement with respect to the merger of
First Alachua with a party other than CCBG or the acquisition of a majority of
the outstanding shares of First Alachua common stock by any party other than
CCBG, or is terminated in anticipation of any such agreement or acquisition,
then, in either event, First Alachua shall immediately pay CCBG, by wire
transfer, $2,320,000 in full satisfaction of CCBG’s losses and damages resulting
from such termination.
If CCBG
and/or First Alachua terminate the merger as described in this section, the
Agreement and Plan of Merger will become void and have no effect, except that
certain provisions of the Agreement and Plan of Merger will survive, including
those relating to the obligations to maintain the confidentiality of certain
information. In addition, termination of the Agreement and Plan of Merger will
not relieve any breaching party from liability for any uncured willful breach of
a representation, warranty, covenant, or agreement giving rise to such
termination.
Dissenters’
Rights
of Appraisal
Holders
of First Alachua common stock as of the record date are entitled to dissenters’
rights of appraisal under the Florida Business Corporation Act. Pursuant to
Section 607.1302 of the Florida Business Corporation Act, a First Alachua
shareholder who does not wish to accept the shares of CCBG common stock to be
received pursuant to the terms of the Agreement and Plan of Merger may dissent
from the merger and elect to receive the fair value of his or her shares
immediately prior to the completion of the merger. Such fair value is exclusive
of any appreciation or depreciation in anticipation of the merger, unless such
exclusion would be inequitable to First Alachua and its remaining
shareholders.
In order
to exercise appraisal rights, a dissenting shareholder of First Alachua must
strictly comply with the statutory procedures of Sections 607.1301 through
607.1333 of the Florida Business Corporation Act, which are summarized below. A
copy of the full text of those Sections is included in this Proxy
Statement/Prospectus in Section X, beginning on page 213. Shareholders
of First Alachua are urged to read Section X in its entirety and to consult with
their legal advisers. Each shareholder of First Alachua who desires to assert
his or her appraisal rights is cautioned that failure on his or her part to
adhere strictly to the requirements of Florida law in any regard will cause a
forfeiture of any appraisal rights.
Procedures
for Exercising Dissenters’ Rights of Appraisal. The
following summary of Florida law is qualified in its entirety by reference to
the full text of the applicable provisions of the Florida Business Corporation
Act included in this Proxy Statement/Prospectus in Section X, beginning on page
213.
1. A
dissenting shareholder must file with First Alachua, prior to the taking of the
vote on the merger, a written notice of intent to demand payment for his or her
shares if the merger is effectuated. A vote against the merger will not alone be
deemed to be the written notice of intent to demand payment. A dissenting
shareholder need not vote against the merger, but cannot vote, or allow any
nominee who holds such shares for the dissenting shareholder to vote, any of his
First Alachua shares for the merger. Such written notification should be
delivered either in person or by mail (certified mail, return receipt requested,
being the recommended form of transmittal) to:
First
Alachua Banking Corporation
15000
N.W. 140th
Street
Alachua,
Florida 32615
Attention:
Jerry M. Smith, President
All such
notices must be signed in the same manner as the shares are registered on the
books of First Alachua. If a shareholder has not provided written notice of
intent to demand fair value before the vote is taken at the special meeting, the
shareholder will be deemed to have waived his or her appraisal
rights.
2. Within 10
days after the completion of the merger, CCBG must supply to each First Alachua
shareholder who filed a notice of intent to demand payment for his or her shares
a written appraisal notice and an appraisal election form that specifies, among
other things,
· |
the
date of the completion of the merger, |
· |
CCBG’s
estimate of the fair value of the First Alachua shares,
|
· |
where
to return the completed appraisal election form and the shareholder’s
stock certificates and the date by which they must be received by CCBG or
its agent, which date may not be fewer than 40 nor more than 60 days after
the date CCBG sent the appraisal notice and appraisal election form to the
shareholder, and |
· |
the
date by which a notice from the shareholder of his or her desire to
withdraw his or her appraisal election must be received by CCBG, which
date must be within 20 days after the date set for receipt by CCBG of the
appraisal election form from the shareholder.
|
The form
must also contain CCBG’s offer to pay to the shareholder the amount that it has
estimated as the fair value of the First Alachua shares, and request certain
information from the shareholder, including:
· |
the
shareholder’s name and address, |
· |
the
number of shares as to which the shareholder is asserting appraisal
rights, |
· |
whether
the shareholder voted for the merger, |
· |
whether
the shareholder accepts the offer of CCBG to pay its estimate of the fair
value of the First Alachua shares to the shareholder, and
|
· |
if
the shareholder does not accept the offer of CCBG, the shareholder’s
estimated fair value of the First Alachua shares and a demand for payment
of the shareholder’s estimated value plus interest.
|
A
dissenting shareholder must send the certificate(s) representing his or her
shares with the appraisal election form. Any
dissenting shareholder failing to return a properly completed appraisal election
form and his or her stock certificates within the period stated in the form will
lose his or her appraisal rights and be bound by the terms of the Agreement and
Plan of Merger.
3. Upon
returning the appraisal election form, a dissenting shareholder shall thereafter
be entitled only to payment pursuant to the procedure set forth in the
applicable sections of the Florida Business Corporation Act and shall not be
entitled to vote or to exercise any other rights of a shareholder, unless the
dissenting shareholder withdraws his or her demand for appraisal within the time
period specified in the appraisal election form.
4. A
dissenting shareholder who has delivered the appraisal election form and his or
her stock certificates may decline to exercise appraisal rights and withdraw
from the appraisal process by giving written notice to CCBG within the time
period specified in the appraisal election form. Thereafter, a dissenting
shareholder may not withdraw from the appraisal process without the written
consent of CCBG. Upon such withdrawal, the right of the dissenting shareholder
to be paid the fair value of his or her shares will cease, and he or she will be
reinstated as a shareholder.
5. If the
dissenting shareholder accepts the offer of CCBG in the appraisal election form
to pay CCBG’s estimate of the fair value of the First Alachua shares, payment
for the shares of the dissenting shareholder is to be made within 90 days after
the receipt of the appraisal election form by CCBG or its agent. Upon payment of
the agreed value, the dissenting shareholder will cease to have any interest in
such shares.
6. A
shareholder must demand appraisal rights with respect to all of the shares
registered in his or her name, except that a record shareholder may assert
appraisal rights as to fewer than all of the shares registered in the record
shareholder’s name but which are owned by a beneficial shareholder, if the
record shareholder objects with respect to all shares owned by the beneficial
shareholder. A record shareholder must notify First Alachua in writing of the
name and address of each beneficial shareholder on whose behalf appraisal rights
are being asserted. A beneficial shareholder may assert appraisal rights as to
any shares held on behalf of the shareholder only if the shareholder submits to
First Alachua the record shareholder’s written consent to the assertion of such
rights before the date specified in the appraisal notice, and does so with
respect to all shares that are beneficially owned by the beneficial
shareholder.
The
current Florida Statute, Section 607.1330, addresses what should occur if a
dissenting shareholder fails to accept the offer of CCBG to pay the value of the
shares as estimated by CCBG, and CCBG fails to comply with the demand of the
dissenting shareholder to pay the value of the shares as estimated by the
dissenting shareholder, plus interest. The following paragraphs summarize these
provisions of Florida law:
1. If a
dissenting shareholder refuses to accept the offer of CCBG to pay the value of
the shares as estimated by CCBG, and CCBG fails to comply with the demand of the
dissenting shareholder to pay the value of the shares as estimated by
the
dissenting shareholder, plus interest, then within 60 days after receipt of a
written demand from any dissenting shareholder given within 60 days after the
date on which the merger was effected, CCBG shall, or at its election at any
time within such period of 60 days may, file an action in any court of competent
jurisdiction in the county in Florida where the registered office of CCBG,
maintained pursuant to Florida law, is located requesting that the fair value of
such shares be determined by the court.
2. If CCBG
fails to institute such a proceeding within the above-prescribed period, any
dissenting shareholder may do so in the name of CCBG. A copy of the initial
pleading will be served on each dissenting shareholder. CCBG is required to pay
each dissenting shareholder the amount found to be due within 10 days after
final determination of the proceedings, which amount may, in the discretion of
the court, include a fair rate of interest, which will also be determined by the
court. Upon payment of the judgment, the dissenting shareholder ceases to have
any interest in such shares.
The
current Florida Statute, Section 607.1331, provides that the costs of a court
appraisal proceeding, including reasonable compensation for, and expenses of,
appraisers appointed by the court, shall be determined by the court and assessed
against CCBG, except that the court may assess costs against all or some of the
dissenting shareholders, in amounts the court finds equitable, to the extent
that the court finds such shareholders acted arbitrarily, vexatiously or not in
good faith with respect to their appraisal rights. The court also may assess the
fees and expenses of counsel and experts for the respective parties, in amounts
the court finds equitable, against (i) CCBG and in favor of any or all
dissenting shareholders if the court finds CCBG did not substantially comply
with the notification provisions set forth in Sections 607.1320 and 607.1322, or
(ii) either CCBG or a dissenting shareholder, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted arbitrarily, vexatiously, or not in good faith with respect to the
appraisal rights. If the court in an appraisal proceeding finds that the
services of counsel for any dissenting shareholder were of substantial benefit
to other dissenting shareholders, and that the fees for those services should
not be assessed against CCBG, the court may award to such counsel reasonable
fees to be paid out of the amounts awarded the dissenting shareholders who were
benefited. To the extent that CCBG fails to make a required payment when a
dissenting shareholder accepts CCBG’s offer to pay the value of the shares as
estimated by CCBG, the dissenting shareholder may sue directly for the amount
owed and, to the extent successful, shall be entitled to recover from CCBG all
costs and expenses of the suit, including counsel fees.
Any
dissenting shareholder who perfects his or her right to be paid the value of his
or her shares will recognize gain or loss, if any, for federal income tax
purposes upon the receipt of cash for such shares. The amount of gain or loss
and its character as ordinary or capital gain or loss will be determined in
accordance with applicable provisions of the Code. See “— Certain Federal Income
Tax Consequences.”
BECAUSE
OF THE COMPLEXITY OF THE PROVISIONS OF THE FLORIDA LAW RELATING TO DISSENTERS’
APPRAISAL RIGHTS, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE MERGER
ARE URGED TO CONSULT THEIR OWN LEGAL ADVISERS.
Conduct
of Business Pending the Merger
First
Alachua has agreed in the Agreement and Plan of Merger that, unless CCBG gives
prior written consent, and except as otherwise expressly contemplated in the
Agreement and Plan of Merger, First Alachua will, and will cause First National
Bank of Alachua to:
· |
operate
its business only in the usual, regular, and ordinary
course; |
· |
preserve
intact its business organization and assets and maintain its rights and
franchises; and |
· |
take
no action which would: |
|
- |
adversely
affect the ability of any party to obtain any consents required for the
transactions contemplated by the Agreement and Plan of Merger without the
imposition of certain conditions or restrictions referred to in the
Agreement and Plan of Merger, or |
|
- |
adversely
affect the ability of any party to perform its covenants and agreements
under the Agreement and Plan of Merger. |
In
addition, First Alachua has agreed that, from the date of the Agreement and Plan
of Merger until the earlier of the effective time of the merger or the
termination of the Agreement and Plan of Merger, unless CCBG has given prior
written consent, and except as otherwise expressly contemplated by the Agreement
and Plan of Merger, First Alachua will not do or agree or commit to do, or
permit any of its subsidiaries to do or agree or commit to do, any of the
following:
· |
amend
its Articles of Incorporation, Bylaws or other governing instruments
(except as specified in the Agreement and Plan of
Merger); |
· |
incur
any additional debt obligation or other obligation for borrowed money
(except indebtedness by First Alachua or one of its subsidiaries to First
Alachua or one of its subsidiaries) in excess of an aggregate of $25,000
(on a consolidated basis) except in the ordinary course of the business of
First Alachua and its subsidiaries consistent with past practices (which
shall include creation of deposit liabilities, purchases of federal funds,
and entry into repurchase agreements fully secured by U.S. government or
agency securities), or impose, or suffer the imposition, on any asset of
First Alachua or any of its subsidiaries of any lien or permit any such
lien to exist (other than in connection with deposits, repurchase
agreements, bankers acceptances, “treasury tax and loan” accounts
established in the ordinary course of business, the satisfaction of legal
requirements in the exercise of trust powers, and liens in effect as of
the date of the Agreement and Plan of Merger that were previously
disclosed to CCBG by First Alachua); |
· |
repurchase,
redeem, or otherwise acquire or exchange (other than exchanges in the
ordinary course under employee benefit plans), directly or indirectly, any
shares, or any securities convertible into any shares, of the capital
stock of First Alachua or any of its subsidiaries or, except as consistent
with past practice, declare or pay any dividend or make any other
distribution in respect of First Alachua’s capital stock or First National
Bank of Alachua’s capital stock; |
· |
except
for the Agreement and Plan of Merger, or as previously disclosed to CCBG
by First Alachua, issue, sell, pledge, encumber, authorize the issuance
of, enter into any contract to issue, sell, pledge, encumber, or authorize
the issuance of, or otherwise permit to become outstanding, any additional
shares of First Alachua common stock or any other capital stock of First
Alachua or any of its subsidiaries, or any stock appreciation rights, or
any option, warrant, or other equity right; |
· |
adjust,
split, combine or reclassify any capital stock of First Alachua or any of
its subsidiaries or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of First Alachua
common stock, or sell, lease, mortgage or otherwise dispose of or
otherwise encumber any asset having a book value in excess of $25,000
(other than in the ordinary course of business for reasonable and adequate
consideration); |
· |
except
for purchases of U.S. Treasury securities or U.S. Government agency
securities, which in either case have maturities of one year or less,
purchase any securities or make any material investment, either by
purchase of stock or securities, contributions to capital, asset transfer,
or purchase of any assets, in any entity, or otherwise acquire direct or
indirect control over any entity, other than in connection
with: |
|
- |
foreclosures
in the ordinary course of business, or |
|
- |
acquisitions
of control by a depository institution subsidiary in its fiduciary
capacity; |
· |
make
any new loans or extensions of credit or renew, extend or renegotiate any
existing loans or extensions of credit: |
|
- |
with
respect to properties or businesses outside of First National Bank of
Alachua’s current market area, or to borrowers whose principal residence
is outside of First National Bank of Alachua’s current market
area, |
|
- |
that
are unsecured in excess of $100,000, or |
|
- |
that
are secured in excess of $300,000; |
· |
purchase
or sell (except for sales of single-family residential first mortgage
loans in the ordinary course of First Alachua’s or First National Bank of
Alachua’s business for fair market value) any whole loans, leases,
mortgages or any loan participations or agented credits or other interest
therein; |
· |
renew
or renegotiate any loans or credits that are on any watch list and/or are
classified or special mentioned or take any similar actions with respect
to collateral held with respect to debts previously contracted or other
real estate owned, except pursuant to safe and sound banking practices and
with prior disclosure to CCBG; |
· |
First
Alachua or First National Bank of Alachua may, however, without the prior
notice to or written consent of CCBG, renew or extend existing credits on
substantially similar terms and conditions as present at the time such
credit was made or last extended, renewed or modified, for a period not to
exceed one year and at rates not less than market rates for comparable
credits and |
|
transactions and without any release of any collateral
except as First Alachua or any of its subsidiaries is presently obligated
under existing written agreements kept as part of First Alachua’s or any
of its subsidiaries’ official records; |
· |
grant
any increase in compensation or benefits to the employees or officers of
First Alachua or any of its subsidiaries, except in accordance with past
practice previously disclosed to CCBG by First Alachua or as required by
law, pay any severance or termination pay or any bonus other than pursuant
to written policies or written contracts in effect on the date of the
Agreement and Plan of Merger and previously disclosed to CCBG by First
Alachua; enter into or amend any severance agreements with officers of
First Alachua; grant any increase in fees or other increases in
compensation or other benefits to directors of First Alachua, except in
accordance with past practice previously disclosed to CCBG by First
Alachua; or voluntarily accelerate the vesting of any stock options or
other stock-based compensation or employee benefits or other equity
rights; |
· |
enter
into or amend any employment contract between First Alachua or any of its
subsidiaries and any person (unless such amendment is required by law)
that First Alachua or any of its subsidiaries does not have the
unconditional right to terminate without liability (other than liability
for services already rendered) at any time on or after the effective time
of the merger; |
· |
adopt
any new employee benefit plan of First Alachua or terminate or withdraw
from, or make any material change in or to, any existing employee benefit
plans of First Alachua other than any such change that is required by law
or that, in the opinion of counsel, is necessary or advisable to maintain
the tax qualified status of any such plan, or make any distributions from
such employee benefit plans, except as required by law, the terms of such
plans or consistent with past practice; |
· |
make
any significant change in any tax or accounting methods or systems of
internal accounting controls, except as may be appropriate to conform to
changes in tax laws or regulatory accounting requirements or accounting
principles generally accepted in the United
States; |
· |
commence
any litigation other than in accordance with past practice, or settle any
litigation involving any liability of First Alachua or any of its
subsidiaries for material money damages or restrictions upon the
operations of First Alachua or any of its subsidiaries;
or |
· |
except
in the ordinary course of business, enter into, modify, amend or terminate
any material contract calling for payments exceeding $25,000 or waive,
release, compromise or assign any material rights or
claims. |
CCBG has
agreed in the Agreement and Plan of Merger that from the date of the Agreement
and Plan of Merger until the earlier of the effective time of the merger or the
termination of the Agreement and Plan of Merger, unless First Alachua has given
prior written consent, and except as otherwise expressly contemplated in the
Agreement and Plan of Merger, CCBG will:
· |
continue
to conduct its business and the business of its subsidiaries in a manner
designed in its reasonable judgment, to enhance the long-term value of the
CCBG capital stock and the business prospects of CCBG and its
subsidiaries |
|
and (to the extent consistent) use all reasonable efforts
to preserve intact CCBG’s and its subsidiaries’ core businesses and
goodwill with their respective employees and the communities they serve,
and |
· |
take
no action which would: |
|
- |
materially
adversely affect the ability of any party to obtain any consents required
for the transactions contemplated by the Agreement and Plan of Merger
without the imposition of certain conditions or restrictions referred to
in the Agreement and Plan of Merger, or |
|
- |
materially
adversely affect the ability of any party to perform its covenants and
agreements under the Agreement and Plan of Merger; provided, that this
will not prevent CCBG or any of its subsidiaries from acquiring any assets
or other businesses or from discontinuing or disposing of any of its
assets or businesses if such action is, in the judgment of CCBG, desirable
in the conduct of the business of CCBG and its subsidiaries, and
|
· |
not
amend or agree or commit to amend or permit any of its subsidiaries to
amend or agree or commit to amend, without the prior written consent of
First Alachua, which consent shall not be unreasonably withheld, the
Articles of Incorporation or Bylaws of CCBG, in any manner adverse to the
holders of First Alachua common stock as compared to the rights of holders
of CCBG common stock generally as of the date of the Agreement and Plan of
Merger. |
Management
and Operations after the Merger; Interests of Certain Persons in the
Merger
Following
the merger, First Alachua will be merged with and into CCBG and First National
Bank of Alachua will be merged with and into Capital City Bank. Certain members
of First Alachua’s management and the First Alachua Board of Directors have
interests in the merger in addition to their interests as shareholders of First
Alachua generally. These include, among other things, provisions in the
Agreement and Plan of Merger relating to indemnification of directors and
officers and eligibility for certain CCBG employee benefits.
Indemnification
and Advancement of Expenses. With
respect to all claims brought during the period of three years after the
effective time of the merger, the Agreement and Plan of Merger provides that
CCBG will indemnify, defend and hold harmless the present and former directors,
officers and employees of First Alachua and First National Bank of Alachua
against all liabilities arising out of actions or omissions arising out of the
indemnified party’s service as a director, officer or employee of First Alachua
and First National Bank of Alachua or, at First Alachua’s request, of another
corporation, partnership, joint venture, trust or other enterprise occurring at
or prior to the effective time of the merger (including the transactions
contemplated by the Agreement and Plan of Merger) to the fullest extent
permitted under Florida law. Notwithstanding the foregoing, with respect to all
losses, liabilities, damage, costs, claims, and expenses related to the First
National Bank of Alachua 401(k) Plan liabilities, if any, neither CCBG nor any
of its subsidiaries will indemnify, defend or hold harmless the present and
former trustees of the First National Bank of Alachua 401(k) Plan, including
Jerry M. Smith and Frank Bevis. Without limiting the foregoing, in any case in
which approval by CCBG is required to effectuate any indemnification, CCBG will
direct, at the election of the indemnified party, that the determination of any
such approval will be made by independent counsel mutually agreed upon between
CCBG and the indemnified party.
CCBG
will, to the extent available (and First Alachua and First National Bank of
Alachua shall cooperate prior to the effective time of the merger in these
efforts), maintain in effect for a period of three years after the effective
time of the merger directors’ and officers’ liability insurance with respect to
claims arising from facts or events which occurred up to 12 months prior to the
effective time of the merger and covering the indemnified parties; provided,
that CCBG will not be obligated to make aggregate premium payments for such
three-year period in respect of such an insurance policy (or coverage replacing
such a policy) which exceed $45,000 for the portion related to First Alachua’s
and First National Bank of Alachua’s directors and officers.
Other
Matters Relating to Employee Benefit Plans. The
Agreement and Plan of Merger also provides that, following the effective time of
the merger, CCBG will provide generally to officers and employees of First
Alachua and its subsidiaries employee benefits under employee benefit and
welfare plans (other than stock option or other plans involving the potential
issuance of CCBG common stock), on terms and conditions which when taken as a
whole are substantially similar to those currently provided by CCBG and its
subsidiaries to their similarly situated officers and employees. CCBG will waive
any pre-existing condition exclusion under any employee health plan for which
any employees and/or officers and dependents covered by First Alachua plans as
of the effective time of the merger will become eligible by virtue of the
preceding sentence, to the extent:
· |
the
pre-existing condition was covered under the corresponding plan maintained
by First Alachua or any of its subsidiaries,
and |
· |
the
individual affected by the pre-existing condition was covered by First
Alachua’s or any of its subsidiaries’ corresponding plan on the date which
immediately precedes the effective time; provided further, however, that
any portion of a pre-existing condition exclusion period imposed by a CCBG
employee health plan will not be enforced to the extent it exceeds in
duration any corresponding provision in effect under a First Alachua
benefit plan immediately prior to closing. In addition, CCBG will credit
employees of First Alachua or any of its subsidiaries for amounts paid
under First Alachua benefit plans for the applicable plan year that
contains the closing date for purposes of applying deductibles,
co-payments and out-of-pocket limitations under CCBG health
plans. |
For
purposes of participation and vesting (but not benefit accrual) under CCBG’s
employee benefit plans, the service of the employees of First Alachua prior to
the effective time of the merger will be treated as service with CCBG or its
subsidiaries participating in such employee benefits plans.
Subject
to compliance with applicable laws and the absence of any material adverse
effect upon CCBG or any First Alachua benefit plans or CCBG benefit plans, First
Alachua will, prior to closing, take such actions as are necessary to terminate
each First Alachua benefit plan (other than the Executive Indexed Salary
Continuation Plan, by and between Jerry M. Smith and First National Bank of
Alachua, dated June 1, 1995, the Endorsement Method Split Dollar Plan Agreement,
dated June 1, 1995, and the First National Bank of Alachua 401(k) Profit Sharing
Plan) and to distribute all benefits attributable to such benefit plans as soon
as administratively feasible.
In
addition, Jerry M. Smith will enter into a three year employment agreement with
CCBG.
First
National Bank of Alachua 401(k) Plan Qualification. First
National Bank of Alachua, as the sponsor of the First National Bank of Alachua
401(k) Plan, and Jerry M. Smith, as co-trustee of the First National Bank of
Alachua 401(k) Plan, will take all actions reasonably necessary prior to the
closing time to submit a proper application to the Internal Revenue Service
pursuant to the Employee Plans Compliance Resolution System (“EPCRS
Application”) as set forth in Revenue Procedure 2003-44 (or successor guidance)
that will contain a reasonable proposal to address certain matters previously
disclosed to CCBG so as to obtain IRS approval of certain corrections, if
needed. It is understood and agreed that these corrections may, if necessary, be
made after the closing time and that IRS approval may be obtained after the
closing time. Jerry M. Smith, as co-trustee of the First National Bank of
Alachua 401(k) Plan, will consult with CCBG and CCBG’s legal counsel prior to
taking any actions, will obtain CCBG and CCBG’s legal counsel’s prior approval
in connection with any IRS or Pension
Benefit Guaranty Corporation submissions,
communications, filings, or applications, and will provide CCBG at closing with
documentation of the actions ultimately implemented.
In the
Agreement and Plan of Merger, CCBG, First Alachua, First National Bank of
Alachua, and Jerry M. Smith, as co-trustee of the First National Bank of Alachua
401(k) Plan, expressly agreed that, at all times subsequent to closing, all
participants in the First National Bank of Alachua 401(k) Plan will make all
elective deferrals exclusively to the Capital City Bank Group, Inc. 401(k) Plan.
Upon approval by the IRS of the EPCRS Application, CCBG, in its sole discretion,
may elect to (1) freeze the First National Bank of Alachua 401(k) Plan; (2)
terminate the First National Bank of Alachua 401(k) Plan; or (3) merge the First
National Bank of Alachua 401(k) Plan with the Capital City Bank Group, Inc.
401(k) Plan as a successor plan. Prior to the closing, First National Bank of
Alachua may continue to pay in the ordinary course the reasonable fees and
expenses relating to the administration of the First National Bank of Alachua
401(k) Plan, subject, however, to the provisions of the Agreement and Plan of
Merger relating to certain potential 401(k) Plan liabilities and any corrections
required pursuant to the EPCRS Application. After the closing, CCBG will pay in
the ordinary course all reasonable fees and expenses relating to the
administration of the First National Bank of Alachua 401(k) Plan, subject,
however, to the provisions of the Agreement and Plan of Merger relating to
certain Alachua potential 401(k) Plan liabilities and any corrections required
pursuant to the EPCRS Application. First Alachua and First National Bank of
Alachua have previously disclosed to CCBG the fees
and expenses that First National Bank of Alachua has paid to service providers
relating to the First National Bank of Alachua 401(k) Plan.
In the
Agreement and Plan of Merger, CCBG, First Alachua, First National Bank of
Alachua, and Jerry M. Smith, as co-trustee of the First National Bank of Alachua
401(k) Plan, also expressly agreed that, at all times subsequent to the
execution of the Agreement and Plan of Merger, no stock or other security issued
by First Alachua or any of its subsidiaries held in the First National Bank of
Alachua 401(k) Plan may be withdrawn or transferred by any participant until
CCBG, in its sole discretion, determines that the terms of the IRS compliance
statement, if any, pursuant to the EPCRS Application have been met.
With
respect to the EPCRS Application, First National Bank of Alachua, and subsequent
to closing, CCBG, will pay all fees and expenses, including all legal fees of
counsel to First National Bank of Alachua, accounting fees, filing fees, and
application fees, subject to the indemnification provisions in a letter
agreement between Jerry M. Smith and CCBG; provided, however, that to the extent
the IRS or any other governmental agency or applicable law (i) prohibits First
Alachua, CCBG, or any of their respective subsidiaries from paying such fees and
expenses; or (ii) deems such amount to be penalties, Jerry M. Smith,
individually, will pay all fees and
expenses,
including all legal fees, accounting fees, filing fees, and application
fees.
Jerry M.
Smith, to the extent Mr. Smith has direct control over the implementation of
corrections, if any, set forth in the IRS compliance statement, and the
then-sponsor of the First National Bank of Alachua 401(k) Plan will be
responsible for timely and properly implementing the corrections set forth in
the IRS compliance statement pursuant to the EPCRS Application, subject to the
indemnification provisions in the letter agreement
mentioned in the preceding paragraph.
Certain
Federal Income Tax Consequences
This
section summarizes the material anticipated federal income tax consequences of
the merger for First Alachua shareholders. This summary is based on the federal
income tax laws now in effect. It does not take into account possible changes in
these laws or interpretations, including amendments to applicable statutes or
regulations or changes in judicial decisions or administrative rulings, some of
which may have retroactive effect. This summary does not purport to address all
aspects of the possible federal income tax consequences of the merger and is not
intended as tax advice to any person. This summary does not address the federal
income tax consequences of the merger to shareholders in light of their
particular circumstances or status (for example, as foreign persons, tax-exempt
entities, dealers in securities, and insurance companies, among others), nor
does this summary address any consequences of the merger under any state, local,
estate, or foreign tax laws. You are urged to consult your own tax advisers as
to the specific tax consequences of the merger to you, including tax return
reporting requirements, the application and effect of federal, foreign, state,
local, and other tax laws, and the implications of any proposed changes in the
tax laws.
The
parties to the merger have not required, and will not request, a federal income
tax ruling from the IRS as to the tax consequences of the merger. Instead, at
the effective time, Gunster, Yoakley & Stewart, P.A., counsel to CCBG, will
render an opinion to CCBG, and Smith, Gambrell & Russell, LLP, counsel to
First Alachua, will render its opinion to First Alachua, concerning the material
federal income tax consequences of the proposed merger under federal income tax
law. Both firms are expected to opine, based upon (a) the assumption that the
merger is consummated in accordance with the Agreement and Plan of Merger, (b)
the accuracy of representations made by the management of CCBG and First
Alachua, and (c) specifically assuming that CCBG stock will constitute at least
45% of the total merger consideration as of the effective time, that the merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code, and that neither CCBG nor First Alachua will recognize gain or loss by
reason of the merger (except for amounts resulting from any required change in
accounting methods and any income and deferred gain or loss recognized pursuant
to Treasury regulations issued under Section 1502 of the Code).
If, at
the effective time, the CCBG stock does not constitute at least 45% of the
merger consideration and the referenced tax opinions are not rendered, the
parties will re-evaluate the transaction before consummating the
merger.
Assuming
the merger qualifies as a reorganization pursuant to Section 368(a) of the Code,
the shareholders of First Alachua will have the following federal income tax
consequences:
· |
First
Alachua shareholders will recognize gain (but not loss) from the exchange,
but not in excess of the cash received; the computation of gain is
|
|
made on a share by share basis; it is not anticipated
that any portion of such gain will be characterized as a
dividend; |
· |
the
basis of the CCBG common stock received by the First Alachua shareholders
in the merger (including fractional shares deemed received and redeemed)
will, in each instance, be the same as the basis of the First Alachua
common stock surrendered in exchange therefor, (i) decreased by the cash
received (other than cash received in lieu of a fractional share of CCBG
common stock) and (ii) increased by the gain recognized in the
exchange; |
· |
the
holding period of the CCBG common stock received by the First Alachua
shareholders will, in each instance, include the period during which the
First Alachua common stock surrendered in exchange therefor was held,
provided that the First Alachua common stock was held as a capital asset
on the date of the exchange; |
· |
the
payment of cash to First Alachua shareholders in lieu of fractional shares
of CCBG common stock will be treated for federal income tax purposes as if
the fractional shares were distributed as part of the exchange and then
were redeemed by CCBG; it is anticipated that any gain or loss recognized
upon such exchange will be capital gain or loss (rather than a dividend),
provided the fractional share constitutes a capital asset in the hands of
the exchanging shareholder; |
· |
subject
to the conditions and limitations of Code Section 302, a holder of First
Alachua common stock who exercises statutory dissenters’ rights in
connection with the merger generally will recognize gain or loss equal to
the difference, if any, between such holder’s tax basis in the First
Alachua common stock exchanged and the amount of cash received in exchange
therefor; and |
· |
unless
the exchange is deemed to have the effect of the distribution of a
dividend, any gain or loss recognized by a holder of First Alachua common
stock as a result of the merger will be capital gain or loss and will be
long-term capital gain or loss if such holder’s stock has been held for
more than one year at the effective time of the
merger. |
Assuming
the merger qualifies as a tax-free reorganization, each First Alachua
shareholder who receives CCBG common stock in the merger will be required to
attach to his or her federal income tax return for the year of the merger a
complete statement of all facts pertinent to the non-recognition of gain,
including the shareholder’s basis in the First Alachua common stock exchanged,
and the number of shares of CCBG common stock and cash received in exchange for
First Alachua common stock. Each shareholder should also keep as part of such
shareholder’s permanent records information necessary to establish such
shareholder’s basis in, and holding period for, the CCBG common stock received
in the merger.
Accounting
Treatment
The
merger will be accounted for as a “purchase,” as that term is used under
accounting principles generally accepted in the United States, for accounting
and financial reporting purposes. Under purchase accounting, the assets and
liabilities, including intangibles, of First Alachua as of the effective time of
the merger will be recorded at their respective fair values and added to those
of CCBG. Any excess of purchase price over the fair values is recorded as
goodwill. Financial statements of CCBG issued after the merger would reflect
such fair values and would not be
restated
retroactively to reflect the historical financial position or results of
operations of First Alachua.
There are
certain conditions on the exchange of First Alachua common stock for CCBG common
stock by affiliates of First Alachua, and there are certain restrictions on the
transferability of the CCBG common stock received by those affiliates. See “-
Resales of CCBG Common Stock,” on page 53.
Expenses
and Fees
The
Agreement and Plan of Merger provides that each of the parties will bear and pay
all direct costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated by the Agreement and Plan of Merger, including
filing, registration and application fees, printing fees, and fees and expenses
of financial or other consultants, investment bankers, accountants, and counsel,
except that CCBG shall bear and pay the filing fees payable, and one-half of the
printing costs incurred, in connection with the registration statement of which
this Proxy Statement/Prospectus is a part. First Alachua will pay one-half of
the printing costs.
In the
event that First Alachua terminates the Agreement and Plan of Merger by entering
into a definitive agreement with respect to the sale of First Alachua to any
person or entity who or which has made a proposal to acquire First Alachua,
First Alachua will pay CCBG $2,320,000 for losses and damages of CCBG incurred
in connection with the merger.
Resales
of CCBG Common Stock
The CCBG
common stock issued to shareholders of First Alachua in connection with the
merger will be registered under the Securities Act of 1933, as amended, and will
be freely transferable by those shareholders of First Alachua and CCBG not
considered to be “Affiliates” of First Alachua or CCBG. “Affiliates” generally
are defined as persons or entities who control, are controlled by, or are under
common control with First Alachua or CCBG (generally, directors, executive
officers and 10% shareholders).
Rules 144
and 145 under the Securities Act restrict the sale of CCBG common stock received
in the merger by Affiliates and certain of their family members and related
interests. Generally speaking, during the one-year period following the
effective time of the merger, Affiliates of First Alachua may resell publicly
the CCBG common stock received by them in the merger within certain limitations
as to the amount of CCBG common stock sold in any three-month period and as to
the manner of sale. After this one-year period, Affiliates of First Alachua who
are not Affiliates of CCBG may resell their shares without restriction. The
ability of Affiliates to resell shares of CCBG common stock received in the
merger under Rule 144 or 145 as summarized in this Proxy Statement/Prospectus
generally will be subject to CCBG’s having satisfied its reporting requirements
under the Securities Exchange Act of 1934, as amended, for specified periods
prior to the time of sale. Affiliates also would be permitted to resell CCBG
common stock received in the merger pursuant to an effective registration
statement under the Securities Act or an available exemption from the Securities
Act registration requirements. This Proxy Statement/Prospectus does not cover
any resales of CCBG common stock received by persons who may be deemed to be
Affiliates of First Alachua or CCBG.
First
Alachua has caused each person First Alachua reasonably believes to be an
Affiliate of First Alachua to sign and deliver to CCBG an agreement providing
that
such
Affiliate will not sell, pledge, transfer, or otherwise dispose of any CCBG
common stock obtained as a result of the merger except in compliance with the
Securities Act and the rules and regulations of the SEC. The certificates
representing CCBG common stock issued to Affiliates in the merger may bear a
legend summarizing these restrictions. See “- Conditions to Consummation of the
Merger,” on page 37.
The
receipt of the First Alachua Affiliate Agreements by CCBG is a condition to
CCBG’s obligations to consummate the merger.
DESCRIPTION
OF CCBG CAPITAL STOCK
General. The
authorized capital stock of CCBG currently consists of 90,000,000 shares of
common stock, $.01 par value per share, of which _________ shares of common
stock were issued and outstanding as of the record date. CCBG is also authorized
to issue 3,000,000 shares of preferred stock, par value $0.01 per share, none of
which is issued and outstanding. Additionally, as of the record date, there were
exercisable options to acquire [_______] shares of CCBG common stock.
Common
Stock. Owners
of CCBG common stock are entitled to receive such dividends as may be declared
by the Board of Directors out of funds legally available therefor. The ability
of CCBG to pay dividends is affected by the ability of its subsidiary depository
institution to pay dividends. The approval of the Florida Department of
Financial Services is required if the total of all dividends declared by Capital
City Bank, in any calendar year exceeds Capital City Bank’s net profits (as
defined in the Florida Statutes) for that year combined with its retained net
profits for the preceding two calendar years. In 2005, Capital City Bank may
declare dividends without regulatory approval of $____ million plus an
additional amount equal to the net profits of Capital City Bank for 2005 up to
the date of any such dividend declaration. See “BUSINESS - Supervision and
Regulation - The Bank - Dividends” and “NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Note 15 - Dividend Restrictions” in CCBG’s Financial Statements for
the year ended December 31, 2003, on page 254.
Except as
may be required by law or as may be provided by the resolutions of the CCBG
Board authorizing the issuance if any class or series of preferred stock, all
voting rights are vested in the owners of the common stock. Each owner of common
stock is entitled to one vote per share on any issue requiring a vote at any
meeting. The shares do not have cumulative voting rights. Shareowners holding a
majority of the voting power of the capital stock issued and outstanding and
entitled to vote, represented in person or by proxy, are necessary to constitute
a quorum at any meeting of the CCBG's shareowners. A vote by the owners of a
majority of the voting power of the capital stock issued and outstanding is
required for matters except for the following, as provided under Florida law and
in accordance with CCBG’s Articles of Incorporation and Bylaws: (i) a vote of
the owners of at least two-thirds of the voting power of the capital stock
issued and outstanding is required to (A) remove for cause any director of CCBG;
or (B) alter, amend, or repeal certain provisions of CCBG’s Bylaws; (ii) a vote
of (A) the owners of at least two-thirds of the voting power of all the then
issued and outstanding shares of the capital stock entitled to vote generally in
the election of directors, voting together as a single class; or (B) a majority
of disinterested directors and the holders of at least a majority of the voting
power of the then-outstanding shares of the capital stock entitled to vote
generally in the election of directors, voting together as a single class, is
required to alter, amend or repeal certain provisions of CCBG’s Articles of
Incorporation; and (iii) directors may be elected by a plurality of the votes
cast by
the
owners of capital stock entitled to vote at a shareowners’ meeting at which a
quorum is present.
CCBG’s
Articles of Incorporation provide that CCBG’s Board of Directors is divided into
three classes, with each class to be as nearly equal in number as possible. The
term of the Class I directors terminates on the date of the 2007 annual meeting
of shareowners, the term of the Class II directors terminates on the date of the
2005 annual meeting of shareowners and the term of the Class III directors
terminates on the date of the 2006 annual meeting of shareowners. At each annual
meeting of shareowners, successors to the class of directors whose term expires
at that annual meeting are to be elected for a three-year term. The effect of
CCBG having a classified Board of Directors is that only approximately one-third
of the members of the Board is elected each year, which effectively requires two
annual meetings for CCBG’s shareowners to change a majority of the members of
the Board of Directors. The purpose of dividing CCBG’s Board of Directors into
classes is to facilitate continuity and stability of leadership of CCBG by
ensuring that experienced personnel familiar with CCBG will be represented on
CCBG’s Board of Directors at all times, and to permit CCBG’s management to plan
for the future for a reasonable period of time. However, by potentially delaying
the time within which an acquiror could obtain working control of the Board of
Directors, this provision may discourage some potential mergers, tender offers,
or takeover attempts.
Upon
liquidation, owners of CCBG common stock will be entitled to receive on a
pro-rata basis, after payment or provision for payment of all debts and
liabilities of CCBG, all assets of CCBG available for distribution, in cash or
in kind. CCBG’s Articles of Incorporation, as amended, do not grant preemptive
rights to the owners of CCBG common stock.
CCBG’s
Articles of Incorporation and Bylaws contain certain provisions designed to
assist the CCBG Board in protecting the interests of CCBG and its shareowners if
any group or person attempts to acquire control of CCBG. For a further
discussion, see “EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS - Anti-Takeover
Provisions Generally,” on page 56.
The
outstanding shares of CCBG common stock are, and the shares of CCBG common stock
to be issued by CCBG in connection with the merger will be, duly authorized,
validly issued, fully paid and nonassessable.
Preferred
Stock. Under
the Articles of Incorporation, the CCBG Board has the power, without further
action by the owners of common stock, to designate and issue from time to time
the preferred stock in series having such designations, powers, preferences,
rights and limitations, and on such terms and conditions as the Board shall from
time to time determine. Such rights and preferences include those as to voting,
dividends (including whether dividends are cumulative), redemption (including
sinking fund provisions), liquidation preferences and conversion.
Transfer
Agent and Registrar. The
Transfer Agent and Registrar for CCBG’s common stock is American Stock Transfer
& Trust Co., Registrar and Transfer Company, 59 Maiden Lane, Plaza Level,
New York, NY 10038.
EFFECT
OF THE MERGER ON RIGHTS OF SHAREHOLDERS
In the
merger, shareholders of First Alachua will exchange their shares of First
Alachua for shares of CCBG. First Alachua, a financial services company, is a
Florida corporation headquartered in Alachua, Florida and is governed by Florida
law and the Articles of Incorporation and Bylaws, as amended, adopted by First
Alachua.
CCBG, a
financial holding company, is a Florida corporation headquartered in
Tallahassee, Florida and is governed by Florida law and CCBG’s Articles of
Incorporation and Bylaws, as amended. There are some significant differences
between the rights of First Alachua’s shareholders and the rights of CCBG’s
shareowners. The following is a summary of the principal differences between the
current rights of First Alachua’s shareholders and those of CCBG’s shareowners.
The
following summary is not intended to be complete and is qualified in its
entirety by reference to the Florida Business Corporation Act, as well as the
Articles of Incorporation and Bylaws, as amended, of First Alachua and CCBG.
Anti-Takeover
Provisions Generally
CCBG’s
Articles of Incorporation and Bylaws contain certain provisions designed to
assist the CCBG Board of Directors in protecting the interests of CCBG and its
shareowners if any group or person attempts to acquire control of CCBG. These
provisions may help the CCBG Board of Directors determine whether a sale of
control is in the best interests of CCBG’s shareowners, or enhance their ability
to maximize the value to be received by the shareowners upon a sale of control
of CCBG. In addition, as of March [__], 2005, William G. Smith, Jr., Chairman,
President, and Chief Executive Officer of CCBG, and his brother, Robert Hill
Smith, Vice President of CCBG, together beneficially owned approximately [__]%
of CCBG’s outstanding common stock. Such concentrated ownership could also have
the effect of deterring takeover proposals.
Although
CCBG’s management believes that these provisions and concentrated ownership are
beneficial to CCBG’s shareowners, these two factors may tend to discourage some
takeover bids. As a result, CCBG’s shareowners may be deprived of opportunities
to sell some or all of their shares at prices that represent a premium over
prevailing market prices. On the other hand, defeating undesirable acquisition
offers can be a very expensive and time-consuming process. To the extent that
these factors discourage undesirable proposals, CCBG may be able to avoid those
expenditures of time and money.
CCBG’s
anti-takeover provisions and concentrated ownership also may discourage open
market purchases by a company that may desire to acquire CCBG. Those purchases
may increase the market price of CCBG common stock temporarily, and enable
shareowners to sell their shares at a price higher than they might otherwise
obtain. In addition, CCBG’s anti-takeover provisions and concentrated ownership
may decrease the market price of CCBG common stock by making the stock less
attractive to persons who invest in securities in anticipation of price
increases from potential acquisition attempts. The anti-takeover provisions and
concentrated ownership also may make it more difficult and time consuming for a
potential acquiror to obtain control of CCBG by replacing the Board of Directors
and management. Furthermore, the anti-takeover provisions and concentrated
ownership may make it more difficult for CCBG’s shareowners to replace the Board
of Directors or management, even if a majority of the shareowners believes that
replacing the Board of Directors or management is in the best interests of CCBG.
Because of these factors, these anti-takeover provisions and concentrated
ownership may tend to perpetuate the incumbent Board of Directors and
management. For more information about these provisions, see “- Authorized
Capital Stock,” on page 57, “- Amendment of Articles of Incorporation and
Bylaws,” on page 58, “- Classified Board of Directors and Absence of Cumulative
Voting,” on page 59, “- Director Removal and Vacancies,” on page 60, “-
Indemnification,” on page 60, “- Ability of Directors to Consider Interests
Other than Shareowner Interests” on page 62, “- Actions by Shareowners Without a
Meeting,” on page 63, “- Shareowner Nominations,” on page 63.
Authorized
Capital Stock
CCBG. CCBG’s
Articles of Incorporation authorize the issuance of up to (1) 90,000,000 shares
of CCBG $.01 par value common stock, of which [__________] shares were issued
and outstanding as of the record date, and (2) 3,000,000 shares of $.01 par
value preferred stock, of which no shares are issued. CCBG’s Board of Directors
may authorize the issuance of additional shares of CCBG common stock without
further action by CCBG’s shareowners, unless such action is required in a
particular case by applicable laws or regulations or by any stock exchange upon
which CCBG’s capital stock may be listed. CCBG’s shareowners do not have the
preemptive right to purchase or subscribe to any unissued authorized shares of
CCBG common stock or any option or warrant for the purchase thereof.
CCBG’s
Board of Directors may issue, without any further action by the shareowners,
shares of CCBG preferred stock, in one or more classes or series, with such
voting, conversion, dividend, redemption and liquidation rights as the Board may
specify. In establishing and issuing shares of CCBG preferred stock, CCBG’s
Board of Directors may designate that CCBG preferred stock will vote as a
separate class on any or all matters, thus diluting the voting power of the CCBG
common stock. The existence of this ability could render more difficult or
discourage an attempt to gain control of CCBG by means of a tender offer,
merger, proxy contest or otherwise. The Board also may designate that CCBG
preferred stock will have dividend rights that are cumulative and that receive
preferential treatment compared to CCBG common stock, and that CCBG preferred
stock will have liquidation rights with priority over CCBG common stock in the
event of CCBG’s liquidation. The Board of Directors also may designate whether
or not CCBG preferred stock shall be subject to the operation of retirement or
sinking funds to be applied to the purchase or redemption of such preferred
shares, and the terms and provisions relative to the operation thereof.
Subject
to certain potential adjustments, the payment of cash in lieu of fractional
shares and payments made to dissenting shareholders, CCBG will issue 725,000
shares of CCBG common stock in the merger. Based on the number of shares of CCBG
common stock outstanding on the record date, it is anticipated that, following
the consummation of the merger, approximately [__________] shares of CCBG common
stock will be outstanding.
The
authority to issue additional shares of CCBG common stock provides CCBG with the
flexibility necessary to meet its future needs without the delay resulting from
seeking shareowner approval. The authorized but unissued shares of CCBG common
stock will be issuable from time to time for any corporate purpose, including,
without limitation, stock splits, stock dividends, employee benefit and
compensation plans, acquisitions, and public or private sales for cash as a
means of raising capital. Such shares could be used to dilute the stock
ownership of persons seeking to obtain control of CCBG. In addition, the sale of
a substantial number of shares of CCBG common stock to persons who have an
understanding with CCBG concerning the voting of such shares, or the
distribution or declaration of a dividend of shares of CCBG common stock (or the
right to receive CCBG common stock) to CCBG shareowners, may have the effect of
discouraging or increasing the cost of unsolicited attempts to acquire control
of CCBG.
First
Alachua. First
Alachua is authorized to issue 500,000 shares, consisting of 250,000 shares of
$0.10 par value Class A common stock and 250,000 shares of $0.10 par value Class
B common stock, of which 4,456 shares of Class A common stock and 5,730 shares
of Class B common stock are outstanding as of the record date. First Alachua has
no other classes of authorized capital stock. First Alachua shareholders
do not
have the preemptive right to purchase or subscribe to any unissued authorized
shares of First Alachua common stock.
The Class
B common stock was created in connection with the assumption by First Alachua of
debt of certain Class B shareholders. While the debt was outstanding, Class A
shareholders were entitled to dividend and liquidation preferences. The
principal and interest on the debt related to the Class B common stock was
repaid in full and retired as of March 26, 1990. Thus, the Class A common stock
and Class B common stock currently have identical rights, preferences and
limitations.
Amendment
of Articles of Incorporation and Bylaws
CCBG. CCBG’s
Articles of Incorporation provide that the affirmative vote of the holders of at
least two-thirds of all the issued and outstanding voting shares of capital
stock is required to amend certain provisions, including provisions relating to
shareowner meetings, nomination, election and removal of directors, acquisition
offers, indemnification, and amendments. However, if such amendment has received
the prior approval by an affirmative vote of a majority of “Disinterested
Directors,” as defined in Section 607.0901(1)(h), Florida Statutes, then the
affirmative vote of the holders of a majority of all the shares of capital stock
of CCBG issued and outstanding and entitled to vote, or such greater percentage
approval as is required by Florida law, is sufficient to amend the Articles. A
“Disinterested Director” is defined in Section 607.0901(1)(h), Florida Statutes,
as:
· |
any
member of the Board of Directors who was a member of the Board of
Directors before the later of January 1, 1987, or the date on which an
interested shareowner became an interested shareowner; and
|
· |
any
member of the Board of Directors who was recommended for election by, or
was elected to fill a vacancy and received the affirmative vote of, a
majority of the Disinterested Directors then on the Board.
|
The
remaining provisions of CCBG’s Articles of Incorporation may be amended by the
holders of at least a majority of the issued and outstanding voting shares of
capital stock.
Subject
to certain restrictions set forth below, either the Board of Directors or the
shareowners of CCBG may amend CCBG’s Bylaws by majority vote. The Board of
Directors may amend the Bylaws and adopt new Bylaws provided that:
· |
the
Board of Directors may not alter, amend, or repeal any bylaw adopted by
shareowners if the shareowners specifically provide that such bylaw is not
subject to amendment or repeal by the Board; and
|
· |
in
the case of any shareowner action, the approval of two-thirds of the
shareowners, acting only by voting at a special meeting, is required to
amend any bylaw provision pertaining to: |
- meetings
of shareowners,
- directors,
- indemnification
of directors, officers, employees and agents, and
- amendments.
First
Alachua. First
Alachua’s Articles of Incorporation are silent as to any vote requirement to
amend such Articles. Accordingly, amendments to the First Alachua Articles
of Incorporation are subject to the Florida Business Corporation Act as it
relates to amendments made to articles of incorporation. The Florida Business
Corporation Act provides that, other than in the case of certain routine
amendments which may be made by the corporation’s Board of Directors without
shareholder action (such as changing the corporate name), an amendment to a
corporation’s articles requires the affirmative vote of a majority of the
outstanding shares of each voting group.
The First
Alachua Bylaws may be amended by the affirmative vote of a majority of the
directors at any regular meeting or special meeting. In addition, under the
Florida Business Corporation Act, an affirmative vote of a majority of the First
Alachua shareholders is required to amend or repeal the bylaws.
Classified
Board of Directors and Absence of Cumulative Voting
CCBG. CCBG’s
Articles of Incorporation provide that CCBG’s Board of Directors is divided into
three classes, with each class to be as nearly equal in number as possible. The
term of the Class I directors terminates on the date of the 2007 annual meeting
of shareowners, the term of the Class II directors terminates on the date of the
2005 annual meeting of shareowners and the term of the Class III directors
terminates on the date of the 2006 annual meeting of shareowners. At each annual
meeting of shareowners, successors to the class of directors whose term expires
at that annual meeting are to be elected for a three-year term. The effect of
CCBG having a classified Board of Directors is that only approximately one-third
of the members of the Board is elected each year, which effectively requires two
annual meetings for CCBG’s shareowners to change a majority of the members of
the Board of Directors. The purpose of dividing CCBG’s Board of Directors into
classes is to facilitate continuity and stability of leadership of CCBG by
ensuring that experienced personnel familiar with CCBG will be represented on
CCBG’s Board of Directors at all times, and to permit CCBG’s management to plan
for the future for a reasonable period of time. However, by potentially delaying
the time within which an acquiror could obtain working control of the Board of
Directors, this provision may discourage some potential mergers, tender offers,
or takeover attempts.
Pursuant
to the CCBG Bylaws, each shareowner is entitled to one vote for each share of
CCBG common stock held and is not entitled to cumulative voting rights in the
election of directors. With cumulative voting, a shareowner has the right to
cast a number of votes equal to the total number of such holder’s shares
multiplied by the number of directors to be elected. The shareowner has the
right to distribute all of his or her votes in any manner among any number of
candidates or to accumulate such shares in favor of one candidate. Directors are
elected by a plurality of the total votes cast by the shares entitled to vote in
the election. With cumulative voting, it may be possible for minority
shareowners to obtain representation on the Board of Directors. Without
cumulative voting, the holders of more than 50% of the shares of CCBG common
stock generally have the ability to elect 100% of the directors. As a result,
the holders of the remaining CCBG common stock effectively may not be able to
elect any person to the Board of Directors. The absence of cumulative voting
thus could make it more difficult for a shareowner who acquires less than a
majority of the shares of CCBG common stock to obtain representation on CCBG’s
Board of Directors.
First
Alachua.
Pursuant to the Bylaws of First Alachua, each director of First Alachua is
subject to annual elections. First Alachua shareholders do not have cumulative
voting rights.
Director
Removal and Vacancies
CCBG. CCBG’s
Articles of Incorporation provide that:
· |
a
director or the entire Board of Directors may be removed, but only for
cause, by the shareowners upon the affirmative vote of the holders of
two-thirds of the voting power of all shares of capital stock entitled to
vote generally in the election of directors; and
|
· |
subject
to the rights of the holders of any series of preferred stock, then
outstanding vacancies on the Board of Directors may be filled by the
affirmative vote of a majority of the remaining directors.
|
The
purpose of this provision is to prevent a majority shareowner from circumventing
the classified board system by removing directors and filling the vacancies with
new individuals selected by that shareowner. Accordingly, the provision may have
the effect of impeding efforts to gain control of the Board of Directors by
anyone who obtains a controlling interest in CCBG common stock. The term of a
director appointed to fill a vacancy shall coincide with the term of the class
of which such director shall have been elected.
First
Alachua. First
Alachua’s Bylaws do not provide for the removal of a director by the
shareholders or directors of First Alachua. Pursuant to the Florida Business
Corporation Act, the shareholders may remove, with or without cause, the entire
board of directors or an individual director. First Alachua’s Bylaws provide
that if any vacancy shall occur among the directors for any reason, the vacancy
may be filled by a majority vote of the remaining directors.
Indemnification
CCBG. The
Florida Business Corporation Act provides that a director, officer, employee, or
other agent of a Florida corporation:
· |
shall
be indemnified by the corporation for all expenses of such litigation
actually and reasonably incurred when he or she is successful on the
merits on any legal proceeding; |
· |
may
be indemnified by the corporation for liability incurred in connection
with such legal proceedings (other than a derivative suit), even if he or
she is not successful on the merits, if he or she acted in good faith and
in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation (and in the case of a criminal proceeding, he
or she had no reasonable cause to believe that such conduct was unlawful);
and |
· |
may
be indemnified by the corporation for expenses of a derivative suit (a
suit by a shareowner alleging a breach by a director or officer of a duty
owed to the corporation) and amounts paid in settlement not to exceed, in
the judgment of the Board of Directors, the estimated costs and expenses
of litigating the proceeding to conclusion, even if he or she is not
successful on the merits, if he or she acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation and the shareowners. If he or she is adjudged
liable in the performance of his or her duties to the corporation,
indemnification may be made in accordance with this paragraph, if and only
to the extent that, a court determines that in view of
|
|
all
of the circumstances, he or she is fairly and reasonably entitled to
indemnification for expenses. |
The
indemnification described in the second and third bullet-points above will be
made only upon a determination by:
· |
a
majority of a quorum of disinterested
directors; |
· |
if
a quorum of disinterested directors is not obtainable, or even if
obtainable, by majority vote of a committee duly designated by the Board
of Directors (in which directors who are parties may participate)
consisting solely of two or more directors who are not at the time parties
to the proceeding; |
· |
independent
legal counsel in a written opinion; |
· |
the
shareowners (excluding the shares owned by the person seeking
indemnification); or |
· |
the
court in which the proceeding is or was pending, if indemnification is
proper under the circumstances because the applicable standard of conduct
has been met. |
The Board
of Directors may authorize the advancement of litigation expenses to a director
or officer upon receipt of an undertaking by the director or officer to repay
such expenses if it is ultimately determined that he or she is not entitled to
be indemnified for them.
The
Florida Business Corporation Act’s statutory scheme of indemnification is not
exclusive and allows expanded indemnification by bylaw, agreement, vote of
shareowners or disinterested directors, or otherwise. Notwithstanding the
permissible expansion of indemnification rights, the Florida Business
Corporation Act does not permit indemnification for:
· |
acts
or omissions that involve a violation of the criminal law, unless the
director, officer, employee or agent had reasonable cause to believe his
or her conduct was lawful or had no reasonable cause to believe his or her
conduct was unlawful; |
· |
any
transaction from which a director, officer or agent derived an improper
personal benefit; |
· |
willful
misconduct or a conscious disregard for the best interests of the
corporation in a proceeding by or in the right of the corporation to
procure a judgment in its favor or in a proceeding by or in the right of a
shareowner; or |
· |
approving
an improper distribution to shareowners. |
CCBG’s
Bylaws expand the Florida Business Corporation Act’s statutory scheme of
indemnification by providing for the mandatory indemnification of any of its
officers and directors for costs and expenses actually and reasonably incurred
in connection with a legal proceeding, regardless of whether the officer or
director is successful on the merits or otherwise, including amounts paid in
settlement of such a proceeding, to the fullest extent permitted by the Florida
Business Corporation Act, and requires advancement of such costs and other
expenses during pending proceedings.
The Board
of Directors has discretionary ability to provide indemnification with respect
to other persons, such as agents and employees.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, or persons controlling CCBG pursuant to the
foregoing provisions, CCBG has been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
First
Alachua.
Indemnification of First Alachua’s directors, officers, employees, and other
agents is provided pursuant to the Florida Business Corporation Act. Neither the
Articles of Incorporation nor the Bylaws of First Alachua provide for an
expansion of the indemnification rights provided under the Florida Business
Corporation Act.
Special
Meetings of Shareowners
CCBG. CCBG’s
Bylaws provide that special meetings of the shareowners shall be
held:
· |
when
directed by the Board of Directors through a resolution adopted by a
majority of the total number of directors (whether or not any vacancies of
previously authorized directorships exist at the time the Board is
presented with such resolution); or |
· |
when
requested in writing and upon appropriate notice by the holders of not
less than 50% of all the shares entitled to vote on any issue at the
meeting. |
As a
result, this provision, taken together with the restriction on the removal of
directors, would prevent a substantial shareowner who held less than 50% of
CCBG’s common stock from compelling shareowner consideration of any proposal
(such as a proposal for a merger) over the opposition of CCBG’s Board of
Directors by calling a special meeting of shareowners at which such shareowner
could replace the entire Board of Directors with nominees who were in favor of
such proposal.
First
Alachua. First
Alachua’s Bylaws provide that special meetings of the shareholders may be called
at any time by the President or a majority of the members of the Board of
Directors and shall be called by the President at the request of the holders of
not less than one-tenth of all the outstanding shares of First Alachua entitled
to vote at the meeting.
Ability
of Directors to Consider Interests Other Than Shareowners’
Interests
CCBG. CCBG’s
Articles of Incorporation expressly require the Board of Directors to consider
all factors it deems relevant in evaluating a proposed share exchange, tender
offer, merger, consolidation, or other similar transaction,
including:
· |
the
best interests of the shareowners; |
· |
the
social, legal, and economic effects on employees, customers, depositors,
and communities served by CCBG and any
subsidiary; |
· |
the
consideration offered in relation to the then current market value of CCBG
or any subsidiary in a freely negotiated
transaction; |
· |
estimations
of future value of the stock of CCBG or any subsidiary as an independent
entity; and |
· |
any
other factor deemed relevant by the Board of Directors.
|
This
gives the Board the ability to consider factors other than shareowner value in
considering acquisition overtures and places such considerations within the duty
of the Board of Directors. This requires the Board to evaluate all factors in
considering a potential future acquisition offer, including the long-term value
of CCBG as a going concern versus the short-term benefit to shareowners, in
order to maximize shareowner value.
This
provision might have the effect of discouraging some tender offers which are
above market price or which might otherwise be favorable to shareowners in the
short run. A decrease in the likelihood of tender or acquisition offers could
lower shareowner value by minimizing or eliminating acquisition market premiums
associated with CCBG’s capital stock.
This
constituency provision of CCBG’s Articles of Incorporation may discourage or
make more difficult certain acquisition proposals or business combinations and,
therefore, may adversely affect the ability of shareowners to benefit from
certain transactions opposed by the CCBG Board of Directors. The constituency
provision would allow the CCBG Board of Directors to take into account the
effects of an acquisition proposal on a broad number of constituencies and to
consider any potential adverse effects in determining whether to accept or
reject such proposal.
First
Alachua. First
Alachua’s Articles of Incorporation and Bylaws do not contain provisions
allowing the directors to consider the effect of potential transactions on any
constituency other than the First Alachua shareholders; however, under the
Florida Business Corporation Act, directors may rely upon such factors as the
director deems relevant, including the long-term prospects and interests of the
corporation and its shareholders, and the social, economic, legal, or other
effects of any action on the employees, suppliers, customers of the corporation
or its subsidiaries, the communities and society in which the corporation or its
subsidiaries operate, and the economy of the state and the nation.
Actions
by Shareowners Without a Meeting
CCBG. CCBG’s
Bylaws provide that any action required or permitted to be taken at a meeting of
shareowners may not be effected by the written consent of the shareowners
entitled to vote on the action.
First
Alachua. First
Alachua’s Bylaws provide that any action required or permitted to be taken at a
meeting of shareholders may be taken without a meeting if a consent in writing,
setting forth the action taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
Shareowner
Nominations
CCBG. CCBG’s
Articles of Incorporation and Bylaws provide that nominations of persons for
election to the Board of Directors at an annual or special meeting of
shareowners may be made:
· |
by
or at the direction of the Board of Directors by any nominating committee
of or person appointed by the Board of Directors;
or |
· |
by
any shareowner of CCBG entitled to vote for the election of directors at
the meeting who complies with the applicable notice procedures set forth
in the Articles of Incorporation and the Bylaws.
|
Despite
these provisions, nominations for Board of Directors positions at special
meetings may be made only if the election of directors is one of the purposes
described in the special meeting notice.
Nominations
of individuals for election at annual meetings, other than nominations made by
or at the direction of the Board of Directors, including by any nominating
committee, shall be made according to the notice procedures set forth in the
Articles of Incorporation and Bylaws.
First
Alachua. First
Alachua’s Articles of Incorporation and Bylaws do not contain specific
provisions addressing nominations of persons for election to the Board of
Directors. In addition, the Florida Business Corporation Act does not address
director nominations.
Dissenters’
Rights of Appraisal
CCBG. The
Florida Business Corporation Act generally gives shareowners of a Florida
corporation appraisal rights and the right to obtain payment of the fair value
of their shares in the event of a merger, share exchange, sale or exchange of
property and certain other corporate transactions. The rights contained in the
Florida Business Corporation Act generally do not apply, however, with respect
to a plan of merger or share exchange or a proposed sale or exchange of
property, to the holders of securities registered on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 holders as of the record date for determining
shareowners entitled to vote on the proposed action and the market value of such
securities is at least $10 million, excluding the value of shares held by
certain company insiders. First Alachua’s shareholders are to receive shares of
CCBG common stock in the merger, and CCBG common stock is traded on the Nasdaq
National Market. Therefore, subsequent to this merger, shareholders of First
Alachua that receive CCBG common stock in the merger will not have statutory
appraisal rights with respect to the CCBG common stock.
First
Alachua. The
Florida Business Corporation Act generally gives shareholders of a Florida
corporation appraisal rights, and the right to obtain payment of the fair value
of their shares in the event of a merger, share exchange, sale or exchange of
property and certain other corporate transactions. To do this, shareholders must
follow certain procedures, including filing certain notices and refraining from
voting their shares in favor of the transaction. The applicable provisions of
the Florida Business Corporation Act are included in this Proxy
Statement/Prospectus in Section X, beginning on page 213.
For a
more detailed discussion of Appraisal Rights, see “DESCRIPTION OF THE MERGER -
Dissenters’ Rights of Appraisal,” on page 41.
COMPARATIVE
MARKET PRICES AND DIVIDENDS
Price
Range of Common Stock
CCBG
common stock is traded on the Nasdaq National Market under the symbol “CCBG.”
First
Alachua common
stock is not publicly traded. The following table sets
forth,
for the indicated periods, the high and low closing sale prices for CCBG common
stock as reported by the Nasdaq National Market. The stock prices do not include
retail mark-ups, mark-downs or commissions. Effective June 13, 2003, CCBG
declared a 5-for-4 stock split. The amounts below have been adjusted to reflect
this stock split. CCBG had a total of _____ shareowners of record as of
______________, 2005.
|
|
|
CCBG |
|
|
|
|
Price
Range |
|
|
|
|
High |
|
|
Low |
|
2004 |
|
|
|
|
|
|
|
Fourth
Quarter |
|
$ |
45.41 |
|
$ |
37.90 |
|
Third
Quarter |
|
|
40.07 |
|
|
35.08 |
|
Second
Quarter |
|
|
43.15 |
|
|
35.50 |
|
First
Quarter |
|
|
45.55 |
|
|
39.05 |
|
2003 |
|
|
|
|
|
|
|
Fourth
Quarter |
|
|
46.83 |
|
|
36.62 |
|
Third
Quarter |
|
|
40.93 |
|
|
35.00 |
|
Second
Quarter |
|
|
36.43 |
|
|
29.74 |
|
First
Quarter |
|
|
32.32 |
|
|
26.81 |
|
2002 |
|
|
|
|
|
|
|
Fourth
Quarter |
|
|
32.04 |
|
|
22.26 |
|
Third
Quarter |
|
|
29.55 |
|
|
22.32 |
|
Second
Quarter |
|
|
27.84 |
|
|
20.60 |
|
First
Quarter |
|
|
22.00 |
|
|
18.12 |
|
2001 |
|
|
|
|
|
|
|
Fourth
Quarter |
|
|
19.74 |
|
|
17.52 |
|
Third
Quarter |
|
|
20.20 |
|
|
16.70 |
|
Second
Quarter |
|
|
20.00 |
|
|
15.90 |
|
First
Quarter |
|
|
20.90 |
|
|
18.50 |
|
2000 |
|
|
|
|
|
|
|
Fourth
Quarter |
|
|
21.40 |
|
|
15.10 |
|
Third
Quarter |
|
|
16.40 |
|
|
15.00 |
|
Second
Quarter |
|
|
16.40 |
|
|
14.40 |
|
First
Quarter |
|
|
18.40 |
|
|
12.00 |
|
On
February 3, 2005, the last day prior to the public announcement of CCBG’s
proposed acquisition of First Alachua, the last reported sale price per share of
CCBG common stock on the Nasdaq National Market was $39.95. On [_______], 2005,
the latest practicable date prior to the mailing of this Proxy
Statement/Prospectus, the last reported sale price per share of CCBG common
stock on the Nasdaq National Market was [$______], and the resulting equivalent
pro forma price per share of First Alachua common stock was [$_____]. The
equivalent per share price of a share of First Alachua common stock at each
specified date represents the last reported sale price of a share of CCBG common
stock on such date multiplied by the exchange ratio of approximately 71.176
shares of CCBG common stock plus $2,847.04 in cash (exclusive of any
withholdings). The market price of CCBG common stock at the effective time of
the merger may be higher or lower than the market price at the time the merger
proposal was announced, at the time the Agreement and Plan of Merger was
executed, at the time of mailing of this Proxy Statement/Prospectus, or at the
time of the Special Meeting. Holders of First Alachua common stock are not
assured of receiving any specific market value of CCBG common stock at the
effective time of the merger, and such value may be substantially more or less
than the current value of CCBG common stock.
There is
no established public trading market for the First Alachua common stock. To the
knowledge of First Alachua, the most recent trade of First Alachua common stock
prior to February 3, 2005, the last day prior to the public announcement of the
proposed merger between CCBG and First Alachua, was the sale of 25 shares on
January 30, 2002, at $1,537.67 per share. To the knowledge of First Alachua,
there have been no trades of First Alachua common stock since the announcement
of the merger.
The
holders of First Alachua common stock are entitled to receive such dividends or
distributions as the board of directors may declare out of funds legally
available for such payments. The payment of distributions by First Alachua is
subject to the restrictions of Florida law applicable to the declaration of
distributions by a business corporation. A corporation generally may not
authorize and make distributions if, after giving effect thereto, it would be
unable to meet its debts as they become due in the usual course of business or
if the corporation’s total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if it were to be dissolved at
the time of distribution, to satisfy claims upon dissolution of shareholders who
have preferential rights superior to the rights of the holders of its common
stock.
The
ability of First Alachua to pay distributions is affected by the ability of its
bank subsidiary to pay dividends. The ability of First Alachua’s bank
subsidiary, as well as of First Alachua, to pay dividends in the future is
influenced by bank regulatory requirements and capital guidelines.
The
information regarding First Alachua common stock is provided for informational
purposes only and, due to the absence of an active market for First Alachua’s
shares, you should not view it as indicative of the actual or market value of
First Alachua common stock.
Stock
Purchase Program
CCBG has
been engaged in an ongoing program to purchase shares of its common stock on the
open market from time to time, depending upon market conditions and other
factors; however, CCBG did not make any purchases of its common stock during
2003 or 2004.
Comparative
Dividends
The
holders of CCBG common stock are entitled to receive dividends when and if
declared by the Board of Directors out of funds legally available therefor.
Although CCBG currently intends to continue to pay quarterly cash dividends on
the CCBG common stock, there can be no assurance that CCBG’s dividend policy
will remain unchanged after completion of the merger. The declaration and
payment of dividends thereafter will depend upon business conditions, operating
results, capital and reserve requirements, and the CCBG Board of Directors’
consideration of other relevant factors.
CCBG is a
legal entity separate and distinct from its subsidiary and its revenues depend
in significant part on the payment of dividends from its subsidiary
institutions. CCBG’s subsidiary depository institution is subject to certain
legal restrictions on the amount of dividends it is permitted to pay. See
“BUSINESS OF CCBG - Dividends” on page 77, “CCBG MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION FOR THE YEAR ENDED
DECEMBER 31, 2003” on page 97 and Note 15 in the Notes to Consolidated Financial
Statements in CCBG’s for the year ended December 31, 2003 on page 254. These
restrictions may limit CCBG's ability to
pay
dividends to its shareowners. As of ______, 2005, CCBG does not believe these
restrictions will impair CCBG's ability to declare and pay its routine and
customary dividends.
The
following table sets forth cash dividends declared per share of CCBG common
stock, as adjusted for CCBG’s stock split on June 13, 2003, and First
Alachua common
stock for the periods indicated.
|
|
CCBG
Quarterly Cash Dividends Declared Per Share |
|
First
Alachua
Semi-Annual Dividends Declared Per Share |
|
YEAR
ENDING DECEMBER 31, 2004 |
|
|
|
|
|
Fourth
Quarter |
|
$ |
0.190 |
|
$ |
1.75 |
|
Third
Quarter |
|
|
0.180 |
|
|
|
|
Second
Quarter |
|
|
0.180 |
|
|
1.75 |
|
First
Quarter |
|
|
0.180 |
|
|
|
|
Total |
|
$ |
0.730 |
|
$ |
3.50 |
|
YEAR
ENDED DECEMBER 31, 2003 |
|
|
|
|
|
|
|
Fourth
Quarter |
|
$ |
0.180 |
|
$ |
1.50 |
|
Third
Quarter |
|
|
0.170 |
|
|
|
|
Second
Quarter |
|
|
0.170 |
|
|
1.50 |
|
First
Quarter |
|
|
0.136 |
|
|
|
|
Total |
|
$ |
0.656 |
|
$ |
3.00 |
|
YEAR
ENDED DECEMBER 31, 2002 |
|
|
|
|
|
|
|
Fourth
Quarter |
|
$ |
0.136 |
|
|
|
|
Third
Quarter |
|
|
0.122 |
|
|
|
|
Second
Quarter |
|
|
0.122 |
|
|
|
|
First
Quarter |
|
|
0.122 |
|
|
|
|
Total |
|
$ |
0.502 |
|
|
|
|
YEAR
ENDED DECEMBER 31, 2001: |
|
|
|
|
|
|
|
Fourth
Quarter |
|
$ |
0.122 |
|
|
|
|
Third
Quarter |
|
|
0.118 |
|
|
|
|
Second
Quarter |
|
|
0.118 |
|
|
|
|
First
Quarter |
|
|
0.118 |
|
|
|
|
Total |
|
$ |
0.476 |
|
|
|
|
YEAR
ENDED DECEMBER 31, 2000: |
|
|
|
|
|
|
|
Fourth
Quarter |
|
$ |
0.118 |
|
|
|
|
Third
Quarter |
|
|
0.106 |
|
|
|
|
Second
Quarter |
|
|
0.106 |
|
|
|
|
First
Quarter |
|
|
0.106 |
|
|
|
|
Total |
|
$ |
0.436 |
|
|
|
|
First
Alachua is restricted under the Agreement and Plan of Merger from paying
dividends or making any distributions in respect of First Alachua’s common
stock,
except as
consistent with past practice and that would not cause First Alachua’s net worth
to fall below $25.375 million.
SECTION
III
BUSINESS
OF FIRST
ALACHUA
General
First
Alachua Banking Corporation is a financial services company and the parent
company of First National Bank of Alachua, which was established in 1908. First
National Bank of Alachua is headquartered in Alachua, Florida and has assets
totaling $229 million in seven banking offices and a mortgage office in north
central Florida and a banking office in St. Johns County, Florida. The Bank
offers its clients a variety of services including deposit services, loans,
ATMs, credit card merchant services, investment services, mortgage lending and
business accounts. First National Bank of Alachua’s website is
www.fnba.net.
Management
Stock Ownership
The
following table presents information about the amount of First Alachua common
stock beneficially owned by each of the directors and executive officers of
First Alachua and all executive officers and directors as a group as of the
record date. Unless otherwise indicated, each person has sole voting and
investment power over the indicated shares. Information relating to beneficial
ownership of the First Alachua common stock is based upon “beneficial ownership”
concepts set forth in rules promulgated under the Exchange Act. Under those
rules, a person is considered to be a beneficial owner of a security if that
person has or shares “voting power,” which includes the power to vote or to
direct the voting of such security, or “investment power,” which includes the
power to dispose or to direct the disposition of such security. Under the rules,
more than one person may be deemed to be a beneficial owner of the same
securities.
Name
of Director or Executive Officer |
|
Position
with First Alachua |
|
Number
of Shares |
|
Percentage |
Jerry
M. Smith (1) |
|
Chairman,
President and Chief Executive Officer |
|
6,142 |
|
60.3% |
A.
Gerald Cayson (2) |
|
Director |
|
393 |
|
3.9% |
Robert
A. Hitchcock |
|
Director |
|
260 |
|
2.6% |
Marjorie
A. Drummond (3) |
|
Secretary |
|
130 |
|
1.3% |
Frank
Bevis (4) |
|
Assistant
Secretary |
|
53 |
|
* |
All
Directors and Executive Officers as a Group (5 persons) |
|
|
|
6,878 |
|
67.5% |
(1) |
|
Includes 202 shares held in a 401(k) plan,
200 shares held in trust for his daughters, 4,757 shares held jointly with
his wife, Laura Smith, and 710 shares held directly or indirectly by Laura
Smith. |
|
|
|
(2) |
|
Includes 175 shares held by his wife, Betty
E. Cayson. |
|
|
|
(3) |
|
Includes 100 shares held in trust for her and
10 shares held jointly with her husband, Graham L. Drummond. |
|
|
|
(4) |
|
Includes 43 shares held in a 401(k) plan and
10 shares held jointly with his wife, Shirley G.
Bevis. |
The First
Alachua directors and executive officers have committed to vote their shares of
First Alachua common stock in favor of the Agreement and Plan of
Merger.
Voting
Securities and Principal Shareholders of First
Alachua
The
following lists each person that directly or indirectly owned, controlled, or
held with power to vote 5% or more of the 10,186 outstanding shares of First
Alachua common stock as of the record date who is not a director or executive
officer of First Alachua. Unless otherwise indicated, each person has sole
voting and investment powers over the indicated shares. Information
relating to beneficial ownership of the First Alachua common stock is based upon
“beneficial ownership” concepts set forth in rules under the Exchange Act
(discussed above).
Name
and Address |
|
Number
of Shares Beneficially Owned at Record Date |
|
Percent
of Class (%) |
Ben
and Faye Eubanks (1)
P.O.
Box 218
Blounstown,
FL 32424 |
|
2,175 |
|
21.4% |
|
|
|
|
|
Laura
Smith (2)
15000
NW 140th
Street
Alachua,
FL 32615 |
|
6,142 |
|
60.3% |
|
|
|
(1) |
|
Includes 1,955 shares held jointly by Ben and
Faye Eubanks and 220 shares held separately by Ben Eubanks. |
|
|
|
(2) |
|
Includes 10 shares held in a 401(k) plan,
4,757 shares held jointly with her husband, Jerry M. Smith, and 675 shares
held directly or indirectly by Jerry M. Smith. |
SECTION
IV
BUSINESS
OF CCBG
General
CCBG is a
financial holding company registered under the Gramm-Leach-Bliley Act of 1999,
and is subject to the Bank Holding Company Act of 1956, as amended. As of
September 30, 2004, CCBG had consolidated total assets of approximately $1.96
billion and shareowners’ equity of approximately $219 million. Its principal
asset is the capital stock of Capital City Bank. Capital City Bank accounted for
approximately 100% of the consolidated assets at September 30, 2004 and
approximately 100% of consolidated net income of CCBG for the year ended
December 31, 2003. In addition to its banking subsidiary, CCBG has one other
direct subsidiary, CCBG Capital Trust I, and seven other indirect subsidiaries,
all of which are wholly-owned subsidiaries of Capital City Bank:
· |
Capital
City Trust Company |
· |
Capital
City Mortgage Company (inactive) |
· |
Capital
City Securities, Inc. |
· |
Capital
City Services Company |
· |
First
Insurance Agency of Grady County, Inc. |
· |
FNB
Financial Services, Inc. |
On March
19, 2004, Capital City Bank completed its merger with Quincy State Bank, a
former affiliate of Synovus Financial Corp. Results of Quincy’s operations have
been included in CCBG’s consolidated financial statements since March 20, 2004.
Quincy had $116.6 million in assets with one office in Quincy, Florida and one
office in Havana, Florida. The transaction was accounted for as a purchase and
resulted in approximately $14.9 million of intangible assets, including
approximately $12.5 million in goodwill and a core deposit intangible of $2.4
million. The core deposit intangible is being amortized over a seven-year
period.
On
October 15, 2004, CCBG completed its merger with Farmers and Merchants Bank.
Results of Farmers and Merchants Bank’s operations have been included in CCBG’s
consolidated financial statements since October 16, 2004. Farmers and Merchants
Bank had $411 million in assets with three full-service offices in Laurens
County, Georgia. The
transaction was accounted for as a purchase and resulted in approximately $41.1
million of intangible assets, including approximately $34.7 million in goodwill,
a core deposit intangible of $5.9 million and a non-compete agreement. The core
deposit intangible is being amortized over a seven-year period and the
non-compete agreement is being amortized over a two-year period.
Banking
Services
Capital
City Bank is a Florida chartered full-service bank engaged in the commercial and
retail banking business. Significant services offered by the Bank include:
· |
Business
Banking -
Capital City Bank provides banking services to corporations and other
business clients. Loans are made for a wide variety of general business
purposes, including financing for commercial business properties,
equipment, inventories and accounts receivable, as well as commercial
leasing, |
|
letters of credit, treasury management services, and
merchant credit card transaction
processing. |
· |
Commercial
Real Estate Lending -
Capital City Bank provides a wide range of products to meet the financing
needs of commercial developers and investors, residential builders and
developers, and community development. |
· |
Residential
Real Estate Lending -
Capital City Bank provides products to help meet the home financing needs
of consumers, including conventional permanent and construction/permanent
(fixed or adjustable rate) financing arrangements, and FHA/VA loan
products. |
Capital
City Bank offers these products through its existing network of offices.
Geographical expansion of the delivery of this product line has occurred over
the past three years through the opening of five mortgage lending offices in
Florida - in Gainesville (Alachua County), Lakeland (Polk County), Ocala (Marion
County), Panacea (Wakulla County) and Steinhatchee (Taylor County), and one in
Thomasville, Georgia (Thomas County).
· |
Retail
Credit -
Capital City Bank provides a full range of loan products to meet the needs
of consumers, including personal loans, automobile loans, boat/RV loans,
home equity loans, and credit card programs.
|
· |
Institutional
Banking -
Capital City Bank provides banking services to meet the needs of state and
local governments, public schools and colleges, charities, membership and
not-for-profit associations, including customized checking and savings
accounts, cash management systems, tax- exempt loans, lines of credit, and
term loans. |
· |
Retail
Banking -
Capital City Bank provides a full range of consumer banking services,
including checking accounts, savings programs, automated teller machines,
overdraft facilities, debit/credit cards, night deposit services, safe
deposit facilities, and PC/Internet banking. Customers can use the
“Star-Line” system to gain 24-hour access to their deposit and loan
account information, and transfer funds between linked accounts. The Bank
is a member of the “Star” ATM Network that permits banking customers to
access cash at automatic teller machines (“ATMs”) or point of sale
merchants at locations throughout the United States.
|
Data
Processing Services
Capital
City Services Company provides data processing services to financial
institutions (including Capital City Bank), government agencies and commercial
customers located throughout North Florida and South Georgia. As of September
30, 2004, the Services Company was providing computer services to six
correspondent banks, which have relationships with Capital City Bank.
Trust
Services and Asset Management
Capital
City Trust Company is the investment management arm of Capital City Bank. The
Trust Company provides asset management for individuals through agency, personal
trust, IRAs and personal investment management accounts. Administration of
pension, profit sharing and 401(k) plans is a significant product line.
Associations, endowments and other non-profit entities hire the Trust Company to
manage their investment portfolios. Individuals requiring the services of a
trustee, personal
representative
or a guardian are served by a staff of well trained professionals. The market
value of trust assets under discretionary management exceeded $611.7 million as
of September 30, 2004, with total assets under administration exceeding $681.1
million.
Brokerage
Services
CCBG
offers access to retail investment products through Capital City Securities,
Inc., a wholly-owned subsidiary of Capital City Bank. These products are offered
through INVEST Financial Corporation, a member of the NASD and SIPC. Non-deposit
investment and insurance products are: (1) not FDIC insured; (2) not deposits,
obligations, or guaranteed by any bank; and (3) subject to investment risk,
including the possible loss of the principal amount invested. Capital City
Securities, Inc.’s brokers are licensed through INVEST Financial Corporation,
and offer a full line of retail securities products, including U.S. Government
bonds, tax-free municipal bonds, stocks, mutual funds, unit investment trusts,
annuities, life insurance and long-term health care. CCBG and its subsidiary are
not affiliated with INVEST Financial Corporation.
Expansion
of Business
Since
1984, CCBG has completed 14 acquisitions totaling $1.4 billion in deposits
within existing and new markets. In addition, in 2003, CCBG opened four new
offices - two in Tallahassee and one each in Springhill and Starke (replacement
office) - to improve service and product delivery within these Florida
markets.
CCBG
plans to continue its expansion, emphasizing a combination of growth in existing
markets and acquisitions. Acquisitions will be focused on a three state area
including Florida, Georgia and Alabama with a particular focus on acquiring
banks and offices.
Competition
The
banking business is rapidly changing and CCBG and its subsidiary operate in a
highly competitive environment, especially with respect to services and pricing.
The on-going consolidation of the banking industry has altered and continues to
significantly alter the competitive environment within the Florida, Georgia, and
Alabama markets. Management believes this consolidation further enhances CCBG’s
competitive position and opportunities in many of its markets. CCBG’s primary
market area is 17 counties in Florida, four counties in Georgia and one county
in Alabama. In these markets, Capital City Bank competes against a wide range of
banking and nonbanking institutions including savings and loan associations,
credit unions, money market funds, mutual fund advisory companies, mortgage
banking companies, investment banking companies, finance companies and other
types of financial institutions.
All of
Florida’s major banking concerns have a presence in Leon County. Capital City
Bank’s Leon County deposits totaled $602.6 million, or 40.9%, of CCBG’s
consolidated deposits at December 31, 2003.
The
following table depicts CCBG’s market share percentage within each respective
county, based on total commercial bank deposits within the county.
|
|
Market Share as
of September 30, |
|
|
|
2003 |
|
2002 |
|
2001 |
|
Florida:(1)(2) |
|
|
|
|
|
|
|
Bradford
County |
|
|
35.1 |
% |
|
38.4 |
% |
|
41.4 |
% |
Citrus
County |
|
|
3.5 |
% |
|
3.3 |
% |
|
3.7 |
% |
Clay
County |
|
|
2.7 |
% |
|
3.2 |
% |
|
4.0 |
% |
Dixie
County |
|
|
15.5 |
% |
|
17.5 |
% |
|
18.7 |
% |
Gadsden
County |
|
|
31.1 |
% |
|
29.4 |
% |
|
30.7 |
% |
Gilchrist
County |
|
|
41.8 |
% |
|
38.5 |
% |
|
39.2 |
% |
Gulf
County |
|
|
28.5 |
% |
|
23.5 |
% |
|
23.1 |
% |
Hernando
County |
|
|
1.8 |
% |
|
1.0 |
% |
|
1.5 |
% |
Jefferson
County |
|
|
27.0 |
% |
|
27.1 |
% |
|
28.6 |
% |
Leon
County |
|
|
17.9 |
% |
|
18.4 |
% |
|
23.2 |
% |
Levy
County |
|
|
33.3 |
% |
|
34.0 |
% |
|
37.3 |
% |
Madison
County |
|
|
18.1 |
% |
|
19.0 |
% |
|
23.7 |
% |
Pasco
County |
|
|
.4 |
% |
|
.4 |
% |
|
.8 |
% |
Putnam
County |
|
|
12.8 |
% |
|
12.5 |
% |
|
15.5 |
% |
Suwannee
County |
|
|
8.6 |
% |
|
9.1 |
% |
|
10.4 |
% |
Taylor
County |
|
|
27.7 |
% |
|
29.0 |
% |
|
33.4 |
% |
Washington
County |
|
|
25.6 |
% |
|
20.4 |
% |
|
22.5 |
% |
Georgia:(3) |
|
|
|
|
|
|
|
|
|
|
Bibb
County |
|
|
3.1 |
% |
|
3.1 |
% |
|
3.6 |
% |
Burke
County |
|
|
11.0 |
% |
|
12.4 |
% |
|
11.4 |
% |
Grady
County |
|
|
24.5 |
% |
|
31.5 |
% |
|
43.3 |
% |
Troup
County |
|
|
10.0 |
% |
|
10.9 |
% |
|
11.2 |
% |
Alabama:(3) |
|
|
|
|
|
|
|
|
|
|
Chambers County
|
|
|
4.1 |
% |
|
3.3 |
% |
|
3.4 |
% |
(1) |
Obtained
from the September 30 Office Level Report published by the Florida Bankers
Association. |
(2) |
Does
not include Alachua, Marion, Polk and Wakulla counties where Capital City
Bank maintains residential mortgage lending offices
only. |
(3) |
Obtained
from the June 30 FDIC/OTS Summary of Deposits
Report. |
The
following table sets forth the number of commercial banks and offices, including
CCBG and its competitors, within each of the respective counties.
County |
|
Number of Commercial
Banks |
|
Number of Commercial Bank Offices |
|
Florida:(1) |
|
|
|
|
|
Bradford |
|
|
3 |
|
|
3 |
|
Citrus |
|
|
10 |
|
|
40 |
|
Clay |
|
|
11 |
|
|
26 |
|
Dixie |
|
|
3 |
|
|
4 |
|
Gadsden |
|
|
4 |
|
|
7 |
|
Gilchrist |
|
|
3 |
|
|
5 |
|
Gulf |
|
|
4 |
|
|
6 |
|
Hernando |
|
|
12 |
|
|
33 |
|
Jefferson |
|
|
2 |
|
|
2 |
|
Leon |
|
|
13 |
|
|
66 |
|
Levy |
|
|
3 |
|
|
11 |
|
Madison |
|
|
5 |
|
|
5 |
|
Pasco |
|
|
16 |
|
|
82 |
|
Putnam |
|
|
5 |
|
|
11 |
|
Suwannee |
|
|
4 |
|
|
4 |
|
Taylor |
|
|
3 |
|
|
4 |
|
Washington |
|
|
3 |
|
|
3 |
|
Georgia:(2) |
|
|
|
|
|
|
|
Bibb |
|
|
10 |
|
|
53 |
|
Burke |
|
|
5 |
|
|
10 |
|
Grady |
|
|
5 |
|
|
8 |
|
Troup |
|
|
9 |
|
|
22 |
|
Alabama:(2) |
|
|
|
|
|
|
|
Chambers |
|
|
5 |
|
|
10 |
|
(1) |
Obtained
from the September 30 Office Level Report published by the Florida Bankers
Association. |
(2) |
Obtained
from the June 30 FDIC/OTS Summary of Deposits
Report. |
Regulatory
Considerations
CCBG and
Capital City Bank must comply with state and federal banking laws and
regulations that control virtually all aspects of operations. These laws and
regulations generally aim to protect depositors, not shareholders. Any changes
in applicable laws or regulations may materially affect the business and
prospects of CCBG. Such legislative or regulatory changes may also affect the
operations of CCBG and Capital City Bank. The following description summarizes
some of the laws and regulations to which CCBG and Capital City Bank are
subject. References to applicable statutes and regulations are brief summaries,
do not purport to be complete, and are qualified in their entirety by reference
to such statutes and regulations.
CCBG
CCBG is
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve") as a financial holding company under the Gramm-Leach-Bliley
Act and is registered with the Federal Reserve as a bank holding company under
the Bank Holding Company Act of 1956.
As a
result, CCBG is subject to supervisory regulation and examination by the Federal
Reserve. The Gramm-Leach-Bliley Act, the Bank Holding Company Act of 1956, and
other federal laws subject financial 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.
Financial
Holding Companies
Permitted
Activities. The
Gramm-Leach-Bliley Act, enacted on November 12, 1999, repealed two
anti-affiliation provisions of the Glass-Steagall Act: Section 20, which
restricted the affiliation of Federal Reserve Member Banks with firms "engaged
principally" in specified securities activities and Section 32, which restricted
officer, director, or employee interlocks between a member bank and any company
or person "primarily engaged" in specified securities activities. In addition,
the Gramm-Leach-Bliley Act expressly preempts most state laws restricting state
banks from owning or acquiring interests in financial affiliates, such as
insurance companies. The general effect of the law was to establish a
comprehensive framework to permit affiliations among commercial banks, insurance
companies, securities firms, and other financial service providers. A bank
holding company may now engage in a full range of activities that are financial
in nature by electing to become a "Financial Holding Company." Activities that
are financial in nature are broadly defined to include not only banking,
insurance, and securities activities, but also merchant banking and additional
activities that the Federal Reserve, in consultation with the Secretary of the
Treasury, determines to be financial in nature, incidental to such financial
activities, or complementary activities that do not pose a substantial risk to
the safety and soundness of depository institutions or the financial system
generally.
In
contrast to financial holding companies, bank holding companies are limited to
managing or controlling banks, furnishing services to or performing services for
its subsidiaries, and engaging in other activities that the Federal Reserve
determines to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Except for the activities relating to
financial holding companies permissible under the Gramm-Leach-Bliley Act, these
restrictions will apply to CCBG. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public that
outweigh possible adverse effects. Possible benefits include greater
convenience, increased competition, and gains in efficiency. Possible adverse
effects include undue concentration of resources, decreased or unfair
competition, conflicts of interest, and unsound banking practices. The Federal
Reserve has determined the following activities, among others, to be permissible
for bank holding companies: factoring accounts receivable, acquiring or
servicing loans, leasing personal property, conducting discount securities
brokerage activities, performing certain data processing services, acting as
agent or broker and selling credit life insurance and certain other types of
insurance in connection with credit transactions, and performing certain
insurance underwriting activities. There are no territorial limitations on
permissible non-banking activities of financial holding companies. Despite prior
approval, the Federal Reserve may order a bank holding company or its
subsidiaries to terminate any activity or to terminate ownership or control of
any subsidiary when the Federal Reserve has reasonable cause to believe that a
serious risk to the financial safety, soundness or stability of any bank
subsidiary of that bank holding company may result from such an activity.
Changes
in Control.
Subject
to certain exceptions, the Bank Holding Company Act of 1956 and the Change in
Bank Control Act, together with regulations thereunder, require Federal Reserve
approval (or, depending on the circumstances, no notice of disapproval) prior to
any person or company acquiring "control" of a financial holding company, such
as CCBG. A conclusive presumption of control exists if an individual or company
acquires 25% or more of any class of voting securities of the financial holding
company. A rebuttable presumption of control exists if a person acquires 10% or
more but less than 25% of any class of voting securities and either CCBG has
registered securities under Section 12 of the Securities Exchange Act of 1934,
as amended, or no other person will own a greater percentage of that class of
voting securities immediately after the transaction.
The Bank
Holding Company Act of 1956 requires, among other things, the prior approval of
the Federal Reserve in any case where a financial holding company proposes to
(i) acquire all or substantially all of the assets of a bank, (ii) acquire
direct or indirect ownership or control of more than 5% of the outstanding
voting stock of any bank (unless it owns a majority of such bank’s voting
shares), or (iii) merge or consolidate with any other financial holding company
or bank holding company.
Under
Florida law, a person or entity proposing to directly or indirectly acquire
control of a Florida bank must first obtain permission from the State of
Florida. Florida statutes define "control" as either (a) indirectly or directly
owning, controlling or having power to vote 25% or more of the voting securities
of a bank; (b) controlling the election of a majority of directors of a bank;
(c) owning, controlling or having power to vote 10% or more of the voting
securities as well as directly or indirectly exercising a controlling influence
over management or policies of a bank; or (d) as determined by the Florida
Department of Financial Services. These requirements will affect CCBG because
Capital City Bank is chartered under Florida law and changes in control of CCBG
are indirect changes in control of CCB.
Tying. Financial
holding companies and their affiliates are prohibited from tying the provision
of certain services, such as extending credit, to other services offered by the
holding company or its affiliates.
Capital;
Dividends; Source of Strength.
The
Federal Reserve imposes certain capital requirements on CCBG under the Bank
Holding Company Act of 1956, including a minimum leverage ratio and a minimum
ratio of "qualifying" capital to risk-weighted assets. These requirements are
described below under "Capital Regulations." Subject to its capital requirements
and certain other restrictions, CCBG is able to borrow money to make a capital
contribution to Capital City Bank, and such loans may be repaid from dividends
paid from Capital City Bank to CCBG.
The
ability of Capital City Bank to pay dividends, however, will be subject to
regulatory restrictions which are described below under "Dividends." CCBG is
also able to raise capital for contributions to Capital City Bank by issuing
securities without having to receive regulatory approval, subject to compliance
with federal and state securities laws.
In
accordance with Federal Reserve policy, CCBG is expected to act as a source of
financial strength to Capital City Bank and to commit resources to support
Capital City Bank in circumstances in which CCBG might not otherwise do so. In
furtherance of this policy, the Federal Reserve may require a financial holding
company to terminate any activity or relinquish control of a nonbank subsidiary
(other than a nonbank subsidiary of a bank) upon the Federal Reserve’s
determination that such activity or control constitutes a serious risk to the
financial soundness or stability of any
subsidiary
depository institution of the financial holding company. Further, federal bank
regulatory authorities have additional discretion to require a financial holding
company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution’s financial
condition.
Capital
City Bank
Capital
City Bank is a banking institution that is chartered by and operated in the
State of Florida, and it is subject to supervision and regulation by the Florida
Department of Financial Services. The Florida Department of Financial Services
supervises and regulates all areas of CCB’s operations including, without
limitation, the making of loans, the issuance of securities, the conduct of
CCB’s corporate affairs, the satisfaction of capital adequacy requirements, the
payment of dividends, and the establishment or closing of branches. Capital City
Bank is also a member bank of the Federal Reserve System, which makes CCB’s
operations subject to broad federal regulation and oversight by the Federal
Reserve. In addition, CCB’s deposit accounts are insured by the FDIC to the
maximum extent permitted by law, and the FDIC has certain enforcement powers
over CCB.
As a
state chartered banking institution in the State of Florida, Capital City Bank
is empowered by statute, subject to the limitations contained in those statutes,
to take savings and time deposits and pay interest on them, to accept demand
deposits, to make loans on residential and other real estate, to make consumer
and commercial loans, to invest, with certain limitations, in equity securities
and in debt obligations of banks and corporations and to provide various other
banking services on behalf of CCB’s customers. Various consumer laws and
regulations also affect the operations of CCB, including state usury laws, laws
relating to fiduciaries, consumer credit and equal credit opportunity laws, and
fair credit reporting. In addition, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") prohibits insured state chartered
institutions from conducting activities as principal that are not permitted for
national banks. A bank, however, may engage in an otherwise prohibited activity
if it meets its minimum capital requirements and the FDIC determines that the
activity does not present a significant risk to the deposit insurance funds.
Reserves
The
Federal Reserve requires all depository institutions to maintain reserves
against some transaction accounts (primarily NOW and Super NOW checking
accounts). The balances maintained to meet the reserve requirements imposed by
the Federal Reserve may be used to satisfy liquidity requirements. An
institution may borrow from the Federal Reserve Bank "discount window" as a
secondary source of funds, provided that the institution meets the Federal
Reserve Bank's credit standards.
Dividends
Capital
City Bank is subject to legal limitations on the frequency and amount of
dividends that can be paid to CCBG. The Federal Reserve may restrict the ability
of Capital City Bank to pay dividends if such payments would constitute an
unsafe or unsound banking practice. These regulations and restrictions may limit
CCBG’s ability to obtain funds from Capital City Bank for its cash needs,
including funds for acquisitions and the payment of dividends, interest and
operating expenses.
In
addition, Florida law also places certain restrictions on the declaration of
dividends from state chartered banks to their holding companies. Pursuant to
Section 658.37 of the Florida Banking Code, the board of directors of state
chartered banks,
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 a dividend of up to the
aggregate net profits of that period combined with the bank’s retained net
profits for the preceding two years and, with the approval of the Florida
Department of Financial Services, declare a dividend from retained net profits
which accrued prior to the preceding two years. Before declaring such dividends,
20% of the net profits for the preceding period as is covered by the dividend
must be transferred to the surplus fund of the bank until this fund becomes
equal to the amount of the bank’s common stock then issued and outstanding. A
state chartered bank may not declare any dividend if (i) its net income from the
current year combined with the retained net income for the preceding two years
is a loss or (ii) the payment of such dividend would cause the capital account
of the bank to fall below the minimum amount required by law, regulation, order
or any written agreement with the Florida Department of Financial Services or a
federal regulatory agency.
Insurance
of Accounts and Other Assessments
The
deposit accounts of Capital City Bank are insured by the Bank Insurance Fund of
the FDIC generally up to a maximum of $100,000 per separately insured depositor,
and Capital City Bank is subject to FDIC deposit insurance assessments. The
federal banking agencies may prohibit any FDIC-insured institution from engaging
in any activity they determine by regulation or order poses a serious threat to
the insurance fund. Pursuant to FDICIA, the FDIC adopted a risk-based system for
determining deposit insurance assessments under which all insured institutions
were placed into one of nine categories and assessed insurance premiums, ranging
from 0.0% to 0.27% of insured deposits, based upon their level of capital and
supervisory evaluation. Because the FDIC sets the assessment rates based upon
the level of assets in the insurance fund, premium rates rise and fall as the
number and size of bank failures increase and decrease, respectively. Under the
system, institutions are assigned to one of three capital categories based
solely on the level of an institution’s capital, "well capitalized," "adequately
capitalized" and "undercapitalized." These three groups are then divided into
three subgroups that reflect varying levels of supervisory concern, from those
that are considered to be healthy to those that are considered to be of
substantial supervisory concern. Bank Insurance Fund and Savings Association
Insurance Fund deposits may be assessed at different rates. Furthermore, the
Economic Growth and Regulatory Paperwork Reduction Act of 1996 requires Bank
Insurance Fund insured banks to participate in the payment of interest due on
Financing Corporation bonds used to finance the thrift bailout.
Transactions
With Affiliates
The
authority of Capital City Bank to engage in transactions with related parties or
"affiliates" or to make loans to insiders is limited by certain provisions of
law and regulations. Commercial banks, such as Capital City Bank, are prohibited
from making extensions of credit to any affiliate that engages in an activity
not permissible under the regulations of the Federal Reserve for a bank holding
company. Pursuant to Sections 23A and 23B of the Federal Reserve Act ("FRA"),
member banks are subject to restrictions regarding transactions with affiliates
("Covered Transactions").
With
respect to any Covered Transaction, the term "affiliate" includes any company
that controls or is controlled by a company that controls Capital City Bank, a
bank or savings association subsidiary of Capital City Bank, any persons who
own, control or vote more than 25% of any class of stock of Capital City Bank or
CCBG and any persons who the Board of Directors determines exercises a
controlling influence
over the
management of Capital City Bank or CCBG. The term "affiliate" also includes any
company controlled by controlling shareowners of Capital City Bank or CCBG and
any company sponsored and advised on a contractual basis by Capital City Bank or
any subsidiary or affiliate of Capital City Bank.
Such
transactions between Capital City Bank and their respective affiliates are
subject to certain requirements and limitations, including limitations on the
amounts of such Covered Transactions that may be undertaken with any one
affiliate and with all affiliates in the aggregate. The federal banking agencies
may further restrict such transactions with affiliates in the interest of safety
and soundness.
Section
23A of the FRA limits Covered Transactions with any one affiliate to 10% of an
institution’s capital stock and surplus and limits aggregate affiliate
transactions to 20% of Capital City Bank’s capital stock and surplus.
Sections
23A and 23B of the FRA provide that a loan transaction with an affiliate
generally must be collateralized (but may not be collateralized by a low quality
asset or securities issued by an affiliate) and that all Covered Transactions,
as well as the sale of assets, the payment of money or the provision of services
by Capital City Bank to affiliates, must be on terms and conditions that are
substantially the same, or at least as favorable to Capital City Bank, as those
prevailing for comparable nonaffiliated transactions. A Covered Transaction
generally is defined as a loan to an affiliate, the purchase of securities
issued by an affiliate, the purchase of assets from an affiliate, the acceptance
of securities issued by an affiliate as collateral for a loan, or the issuance
of a guarantee, acceptance or letter of credit on behalf of an affiliate. In
addition, Capital City Bank generally may not purchase securities issued or
underwritten by affiliates.
On
October 31, 2002, the Federal Reserve issued a new regulation, Regulation W,
effective April 1, 2003, that comprehensively implements Sections 23A and 23B of
the FRA. Regulation W unifies in one public document the Federal Reserve’s
interpretations of Sections 23A and 23B, including several new interpretive
proposals and addresses new issues arising as a result of the expanded scope of
non-banking activities engaged in by banks and bank holding companies in recent
years and those authorized for financial holding companies under the
Gramm-Leach-Bliley Act.
Loans to
executive officers, directors or to any person who directly or indirectly, or
acting through or in concert with one or more persons, owns, controls or has the
power to vote more than 10% of any class of voting securities of a bank
("Principal Shareholders") and their related interests (i.e., any company
controlled by such executive officer, director, or Principal Shareholders), or
to any political or campaign committee the funds or services of which will
benefit such executive officers, directors, or Principal Shareholders or which
is controlled by such executive officers, directors or Principal Shareholders,
are subject to Sections 22(g) and 22(h) of the FRA and the regulations
promulgated thereunder (Regulation O) and Section 13(k) of the Exchange Act
relating to the prohibition on personal loans to executives which exempts
financial institutions in compliance with the insider lending restrictions of
Section 22(h) of the FRA.
Among
other things, these loans must be made on terms substantially the same as those
prevailing on transactions made to unaffiliated individuals and certain
extensions of credit to such persons must first be approved in advance by a
disinterested majority of the entire board of directors. Section 22(h) of the
FRA prohibits loans to any such individuals where the aggregate amount exceeds
an amount equal to 15% of an institution’s unimpaired capital and surplus plus
an additional 10% of unimpaired capital and surplus in the case of loans that
are fully secured by
readily
marketable collateral, or when the aggregate amount on all such extensions of
credit outstanding to all such persons would exceed the bank’s unimpaired
capital and unimpaired surplus. Section 22(g) identifies limited circumstances
in which Capital City Bank is permitted to extend credit to executive officers.
Community
Reinvestment Act
The
Community Reinvestment Act of 1977 ("CRA") and the regulations issued thereunder
are intended to encourage banks to help meet the credit needs of their service
area, including low and moderate income neighborhoods, consistent with the safe
and sound operations of the banks. These regulations also provide for regulatory
assessment of a bank’s record in meeting the needs of its service area when
considering applications to establish branches, merger applications and
applications to acquire the assets and assume the liabilities of another bank.
Federal banking agencies are required to make public a rating of a bank’s
performance under the CRA. In the case of a financial holding company, the CRA
performance record of the banks involved in the transaction are reviewed in
connection with the filing of an application to acquire ownership or control of
shares or assets of a bank or to merge with any other financial holding company.
An unsatisfactory record can substantially delay or block the transaction.
Capital
Regulations
The
Federal Reserve has adopted risk-based, capital adequacy guidelines for
financial holding companies and their subsidiary state-chartered banks that are
members of the Federal Reserve System. The risk-based capital guidelines are
designed to make regulatory capital requirements more sensitive to differences
in risk profiles among banks and financial holding companies, to account for
off-balance sheet exposure, to minimize disincentives for holding liquid assets
and to achieve greater consistency in evaluating the capital adequacy of major
banks throughout the world. Under these guidelines assets and off-balance sheet
items are assigned to broad risk categories each with designated weights. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance sheet items.
The
current guidelines require all financial holding companies and federally
regulated banks to maintain a minimum risk-based total capital ratio equal to
8%, of which at least 4% must be Tier I Capital. Tier I Capital, which includes
common stockholders’ equity, noncumulative perpetual preferred stock, and a
limited amount of cumulative perpetual preferred stock, less certain goodwill
items and other intangible assets, is required to equal at least 4% of
risk-weighted assets. The remainder ("Tier II Capital") may consist of (i) an
allowance for loan losses of up to 1.25% of risk-weighted assets, (ii) excess of
qualifying perpetual preferred stock, (iii) hybrid capital instruments, (iv)
perpetual debt, (v) mandatory convertible securities, and (vi) subordinated debt
and intermediate-term preferred stock up to 50% of Tier I Capital. Total capital
is the sum of Tier I and Tier II Capital less reciprocal holdings of other
banking organizations’ capital instruments, investments in unconsolidated
subsidiaries and any other deductions as determined by the appropriate regulator
(determined on a case by case basis or as a matter of policy after formal rule
making).
In
computing total risk-weighted assets, bank and financial holding company assets
are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain
off-balance sheet items are given similar credit conversion factors to convert
them to asset equivalent amounts to which an appropriate risk-weight will apply.
Most loans will be assigned to the 100% risk category, except for performing
first mortgage
loans
fully secured by residential property, which carry a 50% risk rating. Most
investment securities (including, primarily, general obligation claims on states
or other political subdivisions of the United States) will be assigned to the
20% category, except for municipal or state revenue bonds, which have a 50%
risk-weight, and direct obligations of the U.S. Treasury or obligations backed
by the full faith and credit of the U.S. Government, which have a 0%
risk-weight. In covering off-balance sheet items, direct credit substitutes,
including general guarantees and standby letters of credit backing financial
obligations, are given a 100% conversion factor. Transaction-related
contingencies such as bid bonds, standby letters of credit backing non-financial
obligations, and undrawn commitments (including commercial credit lines with an
initial maturity of more than one year) have a 50% conversion factor. Short-term
commercial letters of credit are converted at 20% and certain short-term
unconditionally cancelable commitments have a 0% factor.
The
federal bank regulatory authorities have also adopted regulations which
supplement the risk-based guideline. These regulations generally require banks
and financial holding companies to maintain a minimum level of Tier I Capital to
total assets less goodwill of 4% (the "leverage ratio"). The Federal Reserve
permits a bank to maintain a minimum 3% leverage ratio if the bank achieves a 1
rating under the CAMELS rating system in its most recent examination, as long as
the bank is not experiencing or anticipating significant growth. The CAMELS
rating is a non-public system used by bank regulators to rate the strength and
weaknesses of financial institutions. The CAMELS rating is comprised of six
categories: capital, asset quality, management, earnings, liquidity, and
interest rate sensitivity.
Banking
organizations experiencing or anticipating significant growth, as well as those
organizations which do not satisfy the criteria described above, will be
required to maintain a minimum leverage ratio ranging generally from 4% to 5%.
The bank regulators also continue to consider a "tangible Tier I leverage ratio"
in evaluating proposals for expansion or new activities. The tangible Tier I
leverage ratio is the ratio of a banking organization’s Tier I Capital, less
deductions for intangibles otherwise includable in Tier I Capital, to total
tangible assets.
Federal
law and regulations establish a capital-based regulatory scheme designed to
promote early intervention for troubled banks and require the FDIC to choose the
least expensive resolution of bank failures. The capital-based regulatory
framework contains five categories of compliance with regulatory capital
requirements, including "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." To qualify as a "well capitalized" institution, a bank must
have a leverage ratio of no less than 5%, a Tier I risk-based ratio of no less
than 6%, and a total risk-based capital ratio of no less than 10%, and the bank
must not be under any order or directive from the appropriate regulatory agency
to meet and maintain a specific capital level.
Under the
regulations, the applicable agency can treat an institution as if it were in the
next lower category if the agency determines (after notice and an opportunity
for hearing) that the institution is in an unsafe or unsound condition or is
engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of
a financial institution will increase, and the permissible activities of the
institution will decrease, as it moves downward through the capital categories.
Institutions that fall into one of the three undercapitalized categories may be
required to (i) submit a capital restoration plan; (ii) raise additional
capital; (iii) restrict their growth, deposit interest rates, and other
activities; (iv) improve their management; (v) eliminate management fees; or
(vi) divest themselves of all or a part of their operations. Financial holding
companies controlling financial
institutions
can be called upon to boost the institutions’ capital and to partially guarantee
the institutions’ performance under their capital restoration plans.
It should
be noted that the minimum ratios referred to above are merely guidelines and the
bank regulators possess the discretionary authority to require higher ratios.
CCBG and
Capital City Bank currently exceed the requirements contained in the applicable
regulations, policies and directives pertaining to capital adequacy, and
management of CCBG and Capital City Bank is unaware of any material violation or
alleged violation of these regulations, policies or directives.
Interstate
Banking and Branching
The Bank
Holding Company Act of 1956 was amended in September 1994 by the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking
Act"). The Interstate Banking Act provides that adequately capitalized and
managed financial holding companies are permitted to acquire banks in any state.
State
laws prohibiting interstate banking or discriminating against out-of-state banks
are preempted. States were not permitted to enact laws opting out of this
provision; however, states were allowed to adopt a minimum age restriction
requiring that target banks located within the state be in existence for a
period of years, up to a maximum of five years, before such bank may be subject
to the Interstate Banking Act. The Interstate Banking Act establishes deposit
caps which prohibit acquisitions that result in the acquiring company
controlling 30% or more of the deposits of insured banks and thrift institutions
held in the state in which the target maintains a branch or 10% or more of the
deposits nationwide. States have the authority to waive the 30% deposit cap.
State-level deposit caps are not preempted as long as they do not discriminate
against out-of-state companies, and the federal deposit caps apply only to
initial entry acquisitions.
The
Interstate Banking Act also provides that adequately capitalized and managed
banks are able to engage in interstate branching by merging with banks in
different states. States were permitted to enact legislation authorizing
interstate mergers earlier than June 1, 1997, or, unlike the interstate banking
provision discussed above, states were permitted to opt out of the application
of the interstate merger provision by enacting specific legislation before June
1, 1997.
Florida
responded to the enactment of the Interstate Banking Act by enacting the Florida
Interstate Branching Act (the "Florida Branching Act"). The purpose of the
Florida Branching Act was to permit interstate branching through merger
transactions under the Interstate Banking Act. Under the Florida Branching Act,
with the prior approval of the Florida Department of Financial Services, a
Florida bank may establish, maintain and operate one or more branches in a state
other than the State of Florida pursuant to a merger transaction in which the
Florida bank is the resulting bank. In addition, the Florida Branching Act
provides that one or more Florida banks may enter into a merger transaction with
one or more out-of-state banks, and an out-of-state bank resulting from such
transaction may maintain and operate the branches of the Florida bank that
participated in such merger. An out-of-state bank, however, is not permitted to
acquire a Florida bank in a merger transaction unless the Florida bank has been
in existence and continuously operated for more than three years.
USA
Patriot Act of 2001
On
October 26, 2001, the USA PATRIOT Act of 2001 (the "Patriot Act") was enacted in
response to the terrorist attacks occurring on September 11, 2001. The Patriot
Act is intended to strengthen the U.S. law enforcement and intelligence
communities’ ability to work together to combat terrorism. Title III of the
Patriot Act, the International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001, amended the Bank Secrecy Act and adopted additional
provisions that increased the obligations of financial institutions, including
Capital City Bank, to identify their customers, watch for and report upon
suspicious transactions, respond to requests for information by federal banking
and law enforcement agencies, and share information with other financial
institutions. In addition, the collected customer identification information
must be verified within a reasonable time after a new account is opened through
documentary or non-documentary methods. All new customers must be screened
against any Section 326 government lists of known or suspected terrorists within
a reasonable time after opening an account.
Consumer
Laws and Regulations
The Bank
is also subject to certain consumer laws and regulations that are designed to
protect consumers in transactions with banks. While the list set forth below is
not exhaustive, these laws and regulations include the Truth in Lending Act, the
Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds
Availability Act, the Equal Credit Opportunity Act, and the Fair Housing Act,
among others. These laws and regulations mandate certain disclosure requirements
and regulate the manner in which financial institutions must deal with customers
when taking deposits or making loans to such customers. The Bank must comply
with the applicable provisions of these consumer protection laws and regulations
as part of its ongoing customer relations.
Future
Legislative Developments
Various
legislation, including proposals to modify the bank regulatory system, expand
the powers of banking institutions and financial holding companies and limit the
investments that a depository institution may make with insured funds, is from
time to time introduced in Congress. Such legislation may change banking
statutes and the environment in which CCBG and its banking subsidiary operate in
substantial and unpredictable ways. We cannot determine the ultimate effect that
potential legislation, if enacted, or implementing regulations with respect
thereto, would have upon our financial condition or results of operations or
that of our banking subsidiary.
Expanding
Enforcement Authority
One of
the major additional burdens imposed on the banking industry by the FDICIA is
the increased ability of banking regulators to monitor the activities of banks
and their holding companies. In addition, the Federal Reserve and FDIC are
possessed with extensive authority to police unsafe or unsound practices and
violations of applicable laws and regulations by depository institutions and
their holding companies. For example, the FDIC may terminate the deposit
insurance of any institution which it determines has engaged in an unsafe or
unsound practice. The agencies can also assess civil money penalties, issue
cease and desist or removal orders, seek injunctions, and publicly disclose such
actions. FDICIA, the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 and other laws have expanded the agencies’ authority in recent years,
and the agencies have not yet fully tested the limits of their powers.
Effect
of Governmental Monetary Policies
The
commercial banking business in which Capital City Bank engages is affected not
only by general economic conditions, but also by the monetary policies of the
Federal Reserve. Changes in the discount rate on member bank borrowing,
availability of borrowing at the "discount window," open market operations, the
imposition of changes in reserve requirements against member banks’ deposits and
assets of foreign branches and the imposition of and changes in reserve
requirements against certain borrowings by banks and their affiliates are some
of the instruments of monetary policy available to the Federal Reserve. These
monetary policies are used in varying combinations to influence overall growth
and distributions of bank loans, investments and deposits, and this use may
affect interest rates charged on loans or paid on deposits. The monetary
policies of the Federal Reserve have had a significant effect on the operating
results of commercial banks and are expected to do so in the future. The
monetary policies of the Federal Reserve are influenced by various factors,
including inflation, unemployment, short-term and long-term changes in the
international trade balance and in the fiscal policies of the U.S. Government.
Future monetary policies and the effect of such policies on the future business
and earnings of Capital City Bank cannot be predicted.
Website
Access to Company's Reports
CCBG’s
internet website is www.ccbg.com. Its annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, including any amendments to
those reports filed or furnished pursuant to section 13(a) or 15(d), and reports
filed pursuant to Section 16, 13(d), and 13(g) of the Exchange Act are available
free of charge through its website as soon as reasonably practicable after they
are electronically filed with, or furnished to, the Securities and Exchange
Commission.
PROPERTIES
CCBG is
headquartered in Tallahassee, Florida. CCBG's 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 Capital City Bank but is located,
in part, on land leased under a long-term agreement.
Capital
City Bank's Parkway Office is located on land leased from the Smith Interests
General Partnership L.L.P. in which several directors and officers have an
interest. The annual lease provides for payments of approximately $85,000, to be
adjusted for inflation in future years.
As of
February 27, 2004, Capital City Bank had 57 banking locations. Of the 57
locations, Capital City Bank leases the land, buildings, or both at 10 locations
and owns the land and buildings at the remaining 47.
LEGAL
PROCEEDINGS
CCBG is a
party to lawsuits and claims arising out of the normal course of business. In
management's opinion, there are no known pending claims or litigation, the
outcome of which would, individually or in the aggregate, have a material effect
on the consolidated results of operations, financial position, or cash flows of
CCBG.
SECTION
V
MANAGEMENT
FOLLOWING THE MERGER
Directors
and Executive Officers
After the Merger
The
directors of CCBG after the merger will be:
CLASS I DIRECTORS |
|
CLASS II DIRECTORS |
|
CLASS III DIRECTORS |
Cader
B. Cox, III
McGrath
Keen, Jr.
Ruth
A. Knox
William
G. Smith, Jr. |
|
Thomas
A. Barron
J.
Everitt Drew
Lina
S. Knox
John
R. Lewis |
|
DuBose
Ausley
Frederick
Carroll, III
John
K. Humphress
Henry
Lewis III |
The
executive officers of CCBG after the merger will be:
William G. Smith, Jr. |
|
Chairman, President and Chief Executive
Officer |
J. Kimbrough Davis |
|
Executive Vice President and Chief Financial
Officer |
Thomas A. Barron |
|
President of Capital City
Bank |
The
following section sets forth certain information regarding each of the persons
who, after the consummation of the merger, will be a director or executive
officer of CCBG. Except as otherwise indicated, each of the named persons has
been engaged in his or her present principal occupation for more than five
years.
CLASS
I DIRECTORS:
(Term
Expiring in 2007)
CADER B.
COX, III
Mr. Cox,
55, has been a director since 1994. Since 1976, he has served as President of
Riverview Plantation, Inc., a resort and agricultural company.
L.
MCGRATH KEEN, JR.
Mr. Keen,
51, has been a director since October 2004. He served as President (since 2000)
and director (1980-2004) of Farmers and Merchants Bank, prior to its merger with
CCBG. He was a principal shareowner of Farmers and Merchants Bank at the time of
the merger.
RUTH A.
KNOX
Ms. Knox,
51, has been a director since 2003. Since 2003, she has served as President of
Wesleyan College, Macon, Georgia. Prior to this appointment, she practiced law
in Atlanta and Macon, Georgia for 25 years.
WILLIAM
G. SMITH, JR.
Mr.
Smith, 51, is the Chairman of the Board of CCBG and has been a director since
1982. In 1995,
he was appointed President and Chief Executive Officer of CCBG and Chairman of
Capital City Bank. In 2003, Mr. Smith was elected Chairman of the Board of
Directors. Mr. Smith is the first cousin of Lina S. Knox.
CLASS
II DIRECTORS:
(Term
Expiring in 2005)
THOMAS A.
BARRON
Mr.
Barron, 52, has been a director since 1982. He is Treasurer of CCBG and was
appointed President of Capital City Bank in 1995.
J.
EVERITT DREW
Mr. Drew,
49, has been a director since 2003. Since 2000, he has been the President of St.
Joe Land Company where his duties include overseeing the sale and development
efforts of several hundred thousand acres of St. Joe property in northwest
Florida and southwest Georgia.
LINA S.
KNOX
Ms. Knox,
60, has been a director since 1998. She is a dedicated community volunteer.
Ms. Knox is the first cousin of William G. Smith, Jr.
JOHN R.
LEWIS
Mr.
Lewis, 62, has been a director since 1999. He is President and Chief Executive
Officer of Super-Lube, Inc., Tallahassee, Florida, which he founded in
1979.
CLASS
III DIRECTORS:
(Term
Expiring in 2006)
DUBOSE
AUSLEY
Mr.
Ausley, 67, has been a director since 1982. He is employed by the law firm of
Ausley & McMullen and was Chairman of this firm and its predecessor for more
than 20 years. Since 1992, he has served as a director of TECO Energy, Inc.
Since 1993, Mr. Ausley has served as a director of Sprint Corporation. In
addition, Mr. Ausley has been nominated, and has consented to serve, as a
director of Huron Consulting Group, Inc.
FREDERICK
CARROLL, III
Mr.
Carroll, 54, has been a director since 2003. Since 1990, he has been the
Managing Partner of Carroll and Company, an accounting firm specializing in tax
and audit based in Tallahassee, Florida. The Board of Directors has determined
that Mr. Carroll, Chairman of the Audit Committee, is both “independent” under
NASD rules and an “audit committee financial expert” as defined by the
SEC.
JOHN K.
HUMPHRESS
Mr.
Humphress, 56, has been a director since 1994. Since 1973, he has been a
shareowner of Krause Humphress Pace & Wadsworth, Chartered
CPA’s.
HENRY
LEWIS III
Dr.
Lewis, 55, has been a director since 2003. He is a Professor and Director of the
College of Pharmacy and Pharmaceutical Studies at Florida A&M
University.
NON-DIRECTOR
EXECUTIVE OFFICER:
J.
KIMBROUGH DAVIS
Mr.
Davis, 51, was appointed Executive Vice President and Chief Financial Officer of
CCBG in 1997. He served as Senior Vice President and Chief Financial Officer
from 1991 to 1997. In 1998, he was appointed Executive Vice President and Chief
Financial Officer of Capital City Bank.
Directors’
Fees
Only
non-employee
directors are compensated for board service. The pay components for 2003
were:
Annual
Retainers:
· |
$10,000
for each non-employee member of the Board of
Directors |
· |
$1,000
additional annual retainer if serving as chairman of a board
committee |
Meeting
Fees:
· |
$750
per month for all board and committee
meetings |
Directors
are also permitted to purchase shares of common stock at a 10% discount from
fair market value under the 1996 Director Stock Purchase Plan. This Plan has
187,500 shares reserved for issuance. Since the inception of this Plan, 37,382
shares have been issued to directors. During 2003, 4,317 shares were purchased.
Purchases under this Plan may not exceed the annual retainer and meeting fees
received.
Share
Ownership Table
Beneficial
owners of more than 5% of the common stock are required to file reports with the
Securities and Exchange Commission. The following table provides information, as
of February 27, 2004, on the common stock beneficially owned by beneficial
owners who have filed the required reports, beneficial owners who were known to
CCBG to beneficially own more than 5% of the common stock, directors, executive
officers named in the Summary Compensation Table, and all executive officers and
directors as a group.
|
|
Shares
Beneficially Owned (1) |
|
|
|
|
Percentage
of Outstanding Shares Owned |
|
Robert
H. Smith (2)
Post
Office Box 11248
Tallahassee,
Florida 32302 |
|
2,502,943
|
|
(3 |
) |
|
18.86 |
% |
William
G. Smith, Jr. (2)
Post
Office Box 11248
Tallahassee,
Florida 32302 |
|
2,659,187
|
|
(4 |
) |
|
20.03 |
% |
DuBose
Ausley |
|
607,396
|
|
(5 |
) |
|
4.58 |
% |
Thomas
A. Barron |
|
259,120
|
|
(6 |
) |
|
1.95 |
% |
Frederick
Carroll, III |
|
43 |
|
|
|
|
* |
|
Cader
B. Cox, III |
|
314,667
|
|
(7 |
) |
|
2.37 |
% |
J.
Kimbrough Davis |
|
48,482
|
|
(8 |
) |
|
* |
|
J.
Everitt Drew |
|
— |
|
|
|
|
— |
|
John
K. Humphress |
|
425,510
|
|
(9 |
) |
|
3.21 |
% |
|
|
Shares
Beneficially Owned (1) |
|
|
|
|
Percentage
of Outstanding Shares Owned |
|
Lina
S. Knox (2) |
|
86,531
|
|
(10 |
) |
|
* |
|
Ruth
A. Knox |
|
510
|
|
|
|
|
* |
|
Henry
Lewis, III |
|
43
|
|
|
|
|
* |
|
John
R. Lewis |
|
10,574
|
|
|
|
|
* |
|
All
Directors and Executive Officers as a Group
(12
Persons) |
|
4,412,063
|
|
|
|
|
33.24 |
% |
|
|
|
* |
|
Represents less than one
percent. |
(1) |
|
For purposes of this table, a person is
deemed to be the beneficial owner of any shares of common stock if he or
she has or shares voting or investment power with respect to the shares or
has a right to acquire beneficial ownership at any time within 60 days
from the record date. "Voting power" is the power to vote or direct the
voting of shares and "investment power" is the power to dispose or direct
the disposition of shares. |
|
|
|
(2) |
|
Robert H. Smith and William G. Smith, Jr. are
brothers, and Lina S. Knox is their first cousin. |
|
|
|
(3) |
|
Includes (i) 80,062 shares in accounts for
his children for which Mr. Smith is custodian; (ii) 452,653 shares held in
certain trusts under which Mr. Smith shares voting and investment power as
a co-trustee; and (iii) 460,523 shares held by a partnership under which
Mr. Smith shares voting and investment power. Of the shares beneficially
owned by Robert H. Smith, 913,176 shares are also beneficially owned by
William G. Smith, Jr. |
|
|
|
(4) |
|
Includes (i) 31,280 shares in an account
for his son for which Mr. Smith is custodian; (ii) 452,653 shares
held in certain trusts under which Mr. Smith shares voting and investment
power as a co-trustee; (iii) 460,523 shares held by a partnership
under which Mr. Smith shares voting and investment power; and (iv) 27,454
shares owned by Mr. Smith’s wife, of which he disclaims beneficial
ownership. Of the shares beneficially owned by William G. Smith, Jr.,
913,176 shares are also beneficially owned by Robert H.
Smith. |
|
|
|
(5) |
|
Includes (i) 228,345 shares held in
trust under which Mr. Ausley serves as trustee and has sole voting and
investment power; and (ii) 10,000 shares owned by Mr. Ausley's wife, of
which he disclaims bene-ficial ownership |
|
|
|
(6) |
|
Includes (i) 50,427 shares held in
trusts under which Mr. Barron serves as trustee; (ii) 573 shares for
which Mr. Barron has power of attorney and may be deemed to be a
beneficial owner; and (iii) 23,125 shares owned by Mr. Barron’s wife, of
which he disclaims beneficial ownership. |
|
|
|
(7) |
|
Includes 300,812 shares held in a trust under
which Mr. Cox shares voting and investment power as a co-trustee, of which
he disclaims beneficial ownership. |
|
|
|
(8) |
|
Includes (i) 1,180 shares in accounts for his
children for which Mr. Davis is custodian; (ii) 15,633 shares owned
jointly by Mr. Davis and his wife; and (iii) 4,082 shares owned by Mr.
Davis's wife, directly and through an Individual Retirement Account, all
of which he disclaims beneficial ownership. |
|
|
|
(9) |
|
Includes (i) 72,712 shares held by a limited
partnership of which Mr. Humphress is a general partner and shares voting
and investment power; (ii) 3,550 shares owned jointly by
Mr. Humphress and his wife; (iii) 2,626 shares in accounts for
his children for which Mr. Humphress is custodian; (iv) 300,812
shares held in a trust under which Mr. Humphress shares voting and
investment power as a co-trustee, of which he disclaims beneficial
ownership; and (v) 1,378 shares owned by Mr. Humphress’s wife,
directly and through an Individual Retirement Account, all of which he
disclaims beneficial ownership. |
|
|
|
(10) |
|
Includes 3,000 shares owned jointly by Ms.
Knox and her husband. |
|
|
|
Compensation
Committee Report
What
is the Executive Compensation Philosophy?
We are
responsible for recommending to the Board of Directors the compensation of
William G. Smith, Jr., the Company’s Chairman, President, and Chief
Executive Officer. Our intent is to provide a competitive compensation program
linked directly to the Company’s strategic business objectives and its
short-term and long-term operating performance. With the objectives of
strengthening company performance and maximizing shareowner value over time,
this policy serves to align the interests of the President and Chief Executive
Officer with those of the shareowners.
What
Comprises Total Executive Compensation?
Total
Executive Compensation
We use a
peer group of banks as a guide for determining the level of compensation. The
banks in the peer group were chosen based on the similarities with the Company
relative to size and markets served.
We also
periodically engage an independent executive compensation consultant to assist
in the assessment and evaluation of the appropriateness of the
compensation.
Base
Salary
We
determine base salary by assessing the responsibilities required by the
position, the experience of the individual, and the competitive market.
Mr. Smith was elected as President and Chief Executive Officer in 1995. In
2003, Mr. Smith’s base salary was set at $185,000 per year, and his base
salary was increased to $195,000 per year for 2004.
Mr. Smith
had the opportunity to earn additional compensation under various
performance-based compensation plans.
Annual
Performance Bonuses
Annual
cash bonuses are paid through the profit participation plan. All senior level
executives participate in this plan.
Performance
Goals
We base
annual performance bonuses on the attainment of corporate and individual goals
that we set at the beginning of the year.
We
believe that accomplishing corporate goals is essential for the Company’s
continued success and sustained financial performance.
The
amount of cash bonus which Mr. Smith may earn increases or decreases, within a
range, by a multiple of the percentage by which net income exceeds or falls
short of established profit goals. The goals are based upon earnings
performance. We believe improved earnings performance will translate into
long-term increases in shareowner value.
Annual
Bonus Payments
Mr. Smith’s
annual bonus was tied directly to the Company’s actual profitability for 2003
compared to targeted profitability. We believe his performance and influence are
best measured by the Company’s profitability and performance goals. In 2003, his
incentive compensation of $373,744 represented approximately 67% of his total
compensation.
Incentive
Plan
The
Company maintains an Associate Incentive Plan. Under this plan, Mr. Smith
is eligible to earn common stock. The Board of Directors determines grants under
this plan based on the achievement of short-term and long-term performance
goals. The Board of Directors sets these goals with reference to several
performance factors. The factors are generally based on financial performance,
including earnings, operating efficiency, asset quality and growth.
Specific
targets and weightings used for establishing short-term and long-term
performance goals are subject to change at the beginning of each measurement
period, and are influenced by the Board of Directors’ desire to emphasize
performance in certain areas. In addition to stock earned in 2003, the Company
provided a cash bonus equal to 31% of the value of stock as a partial offset to
the tax liability incurred by Mr. Smith.
For
achieving short-term performance goals for 2003, Mr. Smith received a
payout of 540 shares under the Associate Incentive Plan, with a fair market
value of $45.99 per share as of December 31, 2003. The opportunity at maximum
performance was 981 shares.
For
achieving long-term performance goals for 2003, Mr. Smith received a payout of
2,130 shares under the Associate Incentive Plan, with a fair market value of
$45.99 per share as of December 31, 2003. The opportunity at maximum performance
was 4,260 shares.
On
January 1, 2003, as a component of Mr. Smith’s long-term compensation, he and
the Company entered into an agreement under which Mr. Smith will be eligible to
receive Company stock options based on the compound growth rate of the Company’s
earnings per share over a three year period. Under this agreement, Mr. Smith
earned 18,510 stock options for the period ended December 31, 2003, and these
options will vest at a rate of one-third per year for each of the three years
after the date of issue. The exercise price of these options is $41.20 per
share. The Company granted these options on March 12, 2004.
Summary
We
believe that the policies and programs described in this report link pay and
performance and serve the best interests of shareowners. We frequently review
the various pay plans and policies and modify them as we deem necessary to
continue to meet the Company’s business objectives and philosophy.
Members
of the Committee:
Cader B.
Cox, III, Chairman
John K.
Humphress
Lina S.
Knox
John R.
Lewis
Executive
Compensation Tables
Summary
Compensation Table
The
following summary compensation table shows compensation information for CCBG's
President and Chief Executive Officer and the two other executive officers of
CCBG who earned over $100,000 in aggregate salary, bonus, and other compensation
in the fiscal year ended December 31, 2003.
|
|
Annual
Compensation |
|
Long-Term
Compensation |
|
|
Name
and Principal
Position (a) |
Year
(b) |
Salary
(c) |
Bonus
(d) |
|
Long-Term
Incentive Plan Payouts(1)
(h) |
|
All
Other Compensation(2)
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
G. Smith, Jr. |
2003 |
$185,000 |
$237,719
|
(3) |
$97,959 |
|
$38,066 |
|
2002 |
$175,000 |
$437,648 |
(3) |
|
|
$
7,387 |
and Chief Executive Officer |
2001 |
$158,000 |
$159,452 |
(3) |
|
|
$
5,543 |
|
|
|
|
|
|
|
|
Thomas
A. Barron |
2003 |
$181,000 |
$222,331 |
(3) |
$96,441 |
|
$37,225 |
|
2002 |
$174,000 |
$406,609 |
(3) |
|
|
$
7,071 |
|
2001 |
$168,000 |
$148,915 |
(3) |
|
|
$
5,461 |
J.
Kimbrough Davis |
2003 |
$165,000 |
$
95,637 |
(3) |
$58,637 |
|
$22,868 |
Executive Vice President |
2002 |
$155,000 |
$156,452 |
(3) |
|
|
$
4,325 |
and
Chief Financial Officer |
2001 |
$150,000 |
$
59,460 |
(3) |
|
|
$
3,320 |
(1) |
Consists
of the dollar value of all payouts made for long-term performance awards
earned under the 1996 Associate Incentive Plan.
|
(2) |
Consists
of cash bonuses paid as a tax supplement to participants in the 1996
Associate Incentive Plan. |
(3) |
Includes
cash bonuses and the dollar value of short-term incentive stock
awards. |
Equity
Compensation Plan Information
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 |
|
— |
|
|
|
1,096,731 |
|
|
|
|
|
|
|
Equity
Compensation Plans Not Approved by Securities Holders |
|
|
|
|
|
|
Total |
|
|
|
|
|
1,096,731 |
Incentive
Compensation and Stock Purchase Plans
1996
Associate Incentive Plan
The 1996
Associate Incentive Plan became effective on February 23, 1996, and is to be
replaced by the 2005 Associate Incentive Plan. Awards under this plan may be
made until December 31, 2005. Under the plan, key associates of CCBG, who have
been selected as participants, are eligible to receive awards of equity-based
incentive compensation, including stock options, stock appreciation rights,
restricted stock awards, performance share units and phantom stock, and
combinations of these incentives. The aggregate number of shares of common stock
subject to awards under the plan may not exceed 937,500. The Board of Directors
administers the plan and has the authority under the plan to establish, adopt,
and revise plan rules and regulations and to make all determinations relating to
the plan.
The plan
authorizes the establishment of long-term performance share programs to be
effective over designated award periods of not less than one year nor more than
five years. At the beginning of each award period, the Board of Directors
establishes performance goals. Performance goals may include financial or other
measures of corporate performance and may be determined on an individual basis
or by categories of participants. The Board of Directors has the discretionary
authority to adjust performance goals or performance measurement standards as it
deems equitable in recognition of extraordinary or non-recurring events
experienced during an award period. The Board of Directors determines the number
of performance share units to be awarded, if any, to each participant who is
selected to receive an award. The Board of Directors may add new participants to
a performance share program after
its
commencement by making pro rata grants. At the completion of a performance share
program, or at other times as specified by the Board of Directors, the Board of
Directors will calculate the number of shares earned by multiplying the number
of performance share units granted to the participant by a performance factor
representing the attainment of the performance goals.
1995
Associate Stock Purchase Plan
The 1995
Associate Stock Purchase Plan became effective on March 20, 1995, and is to be
replaced by the 2005 Associate Stock Purchase Plan. Up to 562,500 shares of
common stock may be purchased under the plan. The purpose of the plan is to
provide associates of CCBG and its subsidiaries with an opportunity to purchase
common stock of CCBG through accumulated payroll deductions or other
contributions. The plan is intended to qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986. Under the terms of
the plan, the common stock purchased by participants is purchased directly from
CCBG. The plan provides that common stock may be purchased at a discount, not to
exceed 15 percent, which is to be fixed by the Board of Directors.
In 2003,
25,234 shares of common stock were purchased under the plan. The Board of
Directors has the right to amend or terminate the plan at any time. However, no
amendment or termination may adversely affect purchase rights previously
granted, unless the Board of Directors determines that the termination of the
plan is in the best interests of CCBG and its shareowners. In this situation,
the Board of Directors may terminate an offering period under the plan on the
last day of the offering period even though it may adversely affect purchase
rights.
Retirement
Plans
Retirement
Plan
CCBG
maintains a noncontributory, defined benefit retirement plan which covers all
full-time associates and part-time associates with 1,000 hours of service
annually who are employed by CCBG and its subsidiaries. The following table
shows the annual retirement benefits payable under the retirement plan to
associates based on the stated compensation and years of service, assuming the
participant was born in 1955 or later, all service is after 1988, and retirement
is at the age of 65.
|
|
|
Years
of Accredited Service |
|
Compensation |
|
|
10
Years |
|
|
20
Years |
|
|
30
Years |
|
$ |
10,000 |
|
$ |
1,900 |
|
$ |
3,800 |
|
$ |
5,700 |
|
|
20,000 |
|
|
3,800 |
|
|
7,600 |
|
|
11,400 |
|
|
30,000 |
|
|
5,900 |
|
|
11,900 |
|
|
17,800 |
|
|
40,000 |
|
|
8,200 |
|
|
16,400 |
|
|
24,600 |
|
|
50,000 |
|
|
10,500 |
|
|
21,000 |
|
|
31,500 |
|
|
60,000 |
|
|
12,800 |
|
|
25,500 |
|
|
38,300 |
|
|
70,000 |
|
|
15,000 |
|
|
30,100 |
|
|
45,100 |
|
|
80,000 |
|
|
17,300 |
|
|
34,700 |
|
|
52,000 |
|
|
90,000 |
|
|
19,600 |
|
|
39,200 |
|
|
58,800 |
|
|
100,000 |
|
|
21,900 |
|
|
43,800 |
|
|
65,700 |
|
|
150,000 |
|
|
33,300 |
|
|
66,600 |
|
|
99,900 |
|
|
200,000 |
|
|
44,700 |
|
|
89,400 |
|
|
134,100 |
|
|
205,000 |
|
|
45,800 |
|
|
91,700 |
|
|
137,500 |
|
Benefits
for retirement plan purposes are calculated based upon the average monthly
compensation for the highest five consecutive years in the last 10 years of
employment. CCBG’s retirement plan also provides pre-retirement disability and
death benefits. The benefits are not subject to any deduction for Social
Security or other offset amounts. For 2004, the maximum annual compensation
recognized for benefit purposes is $205,000, and the maximum annual benefit
permitted under IRS regulations is $165,000.
As of
December 31, 2003, the applicable compensation levels and accredited service for
determination of pension benefits for the named executive officers would have
been:
|
Compensation |
|
Accredited
Service |
Thomas
A. Barron |
$571,871 |
|
29 |
William
G. Smith, Jr. |
$606,207 |
|
25 |
J.
Kimbrough Davis |
$311,825 |
|
22 |
Benefits
are equal to the adjusted accrued benefits as of December 31, 1988, computed in
accordance with a prior formula, plus a percentage of average monthly
compensation for each year of service after 1988. Employees with service prior
to 1989 or born prior to 1955 will have different benefits from those shown
above, depending upon their year of birth, years of service prior to 1989, and
compensation level. No single table is possible for these employees due to the
multiple variables involved.
Supplemental
Employee Retirement Plan
Effective
January 1, 1996, the Board of Directors of CCBG implemented a supplemental
employee retirement plan covering William G. Smith, Jr. and Thomas A.
Barron. In 2001, the Board extended the coverage of this plan to
J. Kimbrough Davis. This plan is designed to restore a portion of the
benefits Messrs. Smith, Barron, and Davis would otherwise receive under the
Retirement Plan if these benefits were not limited by the tax laws. Participants
under the Retirement Plan receive benefits determined by a formula that is based
on average monthly compensation. Due to the tax law limitations, the relative
benefits payable to Messrs. Smith, Barron, and Davis are significantly less than
those of other Retirement Plan participants. The supplemental plan provides
additional benefits, which, when combined with benefits payable under the
Retirement Plan, approximate 60 percent of average monthly compensation, which
more closely aligns the benefits payable to Messrs. Smith, Barron, and
Davis with those of other Retirement Plan participants. The Supplemental Plan is
not a qualified plan under the tax laws. CCBG has no obligation to fund the
supplemental plan but accrues for its anticipated obligations under the
supplemental plan on an annual basis.
401(k)
Profit Sharing Plan
On
October 1, 1997, CCBG adopted a 401(k) plan. The purpose of the 401(k) plan is
to serve as a supplementary retirement plan for employees who are eligible to
participate. It is primarily intended to provide a convenient program of regular
savings and investment for eligible employees. The Retirement Committee of CCBG
presently administers the 401(k) plan. Capital City Trust Company, an indirect
wholly-owned subsidiary of CCBG, serves as trustee of the trust fund into which
funds contributed under the 401(k) plan and the earnings under the 401(k) plan
are held. One investment option provided by the 401(k) plan is a fund of CCBG's
common stock.
Up to
50,000 shares of common stock may be purchased under the 401(k) plan. During
fiscal year 2003, no shares of common stock were issued under the 401(k) plan,
but plan participants made open market purchases in the amount of 3,396 shares.
Purchases of CCBG's common stock under this plan are voluntary, and CCBG does
not restrict the sale of its common stock under the 401(k) plan. In 2003, CCBG
began making matching cash
contributions of up to 6% of the participant's compensation for qualifying
associates whose employment commenced after January 1, 2003.
Transactions
with Management and Related Parties
During
2003, Capital City Bank, a wholly-owned subsidiary of CCBG, had outstanding
loans to several of CCBG's directors, executive officers, their associates and
members of the immediate families of these directors and executive officers.
These loans were made in the ordinary course of business and were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with others. These loans do
not involve more than the normal risk of collectability or present other
unfavorable features.
DuBose
Ausley, a director of CCBG, is employed by and is the former Chairman of Ausley
& McMullen, CCBG's general counsel. During 2003, CCBG and CCBG's
subsidiaries paid legal fees to this law firm of approximately
$765,000.
Capital
City Bank's Apalachee Parkway Office is located on land leased from the Smith
Interests General Partnership L.L.P. ("SIGP") in which William G. Smith, Jr.
(Chairman, President, and Chief Executive Officer of CCBG), Robert H. Smith (a
Vice President of CCBG), and Lina S. Knox (a Director of CCBG) are partners. In
addition, a trust for the benefit of Elaine W. Smith, a relative of William G.
Smith, Jr. and Robert H. Smith, of which DuBose Ausley, a director of CCBG, is
trustee, is also a partner of SIGP. As trustee of this trust, Mr. Ausley has the
power to vote the SIGP interests owned by the trust. Under a lease agreement
expiring in 2024, Capital City Bank provides annual lease payments of
approximately $85,000, to be adjusted for inflation in future
years.
Five-Year
Performance Graph
This
performance graph compares the cumulative total shareholder return on the
Company’s common stock with the NASDAQ - Total US and the NASDAQ Bank Index for
the past five years. The graph assumes that $100 was invested on December 31,
1998 in the Company’s common stock and each of the above indices, and that
dividends are reinvested. The shareholder return shown below for the five-year
historical period may not be indicative of future performance.
|
|
Period
Ending |
|
Index |
12/31/98 |
12/31/99 |
12/31/00 |
12/31/01 |
12/31/02 |
12/31/03 |
|
|
|
|
|
|
|
Capital
City Bank Group, Inc. |
100.00 |
79.75 |
94.52 |
93.02 |
156.34 |
233.50 |
NASDAQ
- Total US |
100.00 |
185.95 |
113.19 |
89.65 |
61.67 |
92.90 |
NASDAQ
Bank Index* |
100.00 |
96.15 |
109.84 |
118.92 |
121.74 |
156.62 |
SNL
$1B-$5B Bank Index |
100.00 |
91.91 |
104.29 |
126.72 |
146.28 |
198.92 |
|
|
|
|
|
|
|
* Source:
CRSP, Center for Research in Security Prices, Graduate School of Business,
The University of Chicago 2004. |
Used
with permission. All rights reserved.
crsp.com |
SECTION
VI
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003
Management’s
discussion and analysis ("MD&A") provides supplemental information, which
sets forth the major factors that have affected CCBG's financial condition and
results of operations and should be read in conjunction with the Consolidated
Financial Statements and related notes. The MD&A is divided into subsections
entitled "Executive Overview," "Earnings Analysis," "Financial Condition,"
"Liquidity and Capital Resources," "Off-Balance Sheet Arrangements," and
"Accounting Policies." Information therein should facilitate a better
understanding of the major factors and trends that affect CCBG's earnings
performance and financial condition, and how CCBG's performance during 2003
compares with prior years. Throughout this section, Capital City Bank Group,
Inc., and its subsidiary, collectively, are referred to as "CCBG."
The
period-to-date averages used in this report are based on daily balances for each
respective period. In certain circumstances, comparing average balances for the
fourth quarters of consecutive years may be more meaningful than simply
analyzing year-to-date averages. Therefore, where appropriate, quarterly
averages have been presented for analysis and have been noted as such. See Table
2 for annual averages and Table 15 for financial information presented on a
quarterly basis.
This
Report and other Company communications and statements may contain
"forward-looking statements." 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" and similar expressions are intended to
identify forward-looking statements. The following factors, among others, could
cause our financial performance to differ materially from what is contemplated
in those forward-looking statements:
The
strength of the United States economy in general and the strength of the local
economies in which we conduct operations may be different than expected
resulting in, among other things, a deterioration in credit quality or a reduced
demand for credit, including the resultant effect on our loan portfolio and
allowance for loan losses;
The
effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal
Reserve System;
· |
Inflation,
interest rate, market and monetary fluctuations;
|
· |
Adverse
conditions in the stock market and other capital markets and the impact of
those conditions on our capital markets and capital management activities,
including our investment and wealth management advisory businesses and
brokerage activities; |
· |
Changes
in U.S. foreign or military policy; |
· |
The
timely development of competitive new products and services by us and the
acceptance of those products and services by new and existing customers;
|
· |
The
willingness of customers to accept third-party products marketed by us;
|
· |
The
willingness of customers to substitute competitors' products and services
for our products and services and vice
versa; |
· |
The
impact of changes in financial services laws and regulations (including
laws concerning taxes, banking, securities and insurance);
|
· |
Changes
in consumer spending and saving habits; |
· |
The
effect of corporate restructuring, acquisitions or dispositions, including
the actual restructuring and other related charges and the failure to
achieve the expected gains, revenue growth or expense savings from such
corporate restructuring, acquisitions or dispositions;
|
· |
The
growth and profitability of our noninterest or fee income being less than
expected; |
· |
Unanticipated
regulatory or judicial proceedings; |
· |
The
impact of changes in accounting policies by the Securities and Exchange
Commission; |
· |
Adverse
changes in the financial performance and/or condition of our borrowers,
which could impact the repayment of those borrowers' outstanding loans;
and |
· |
Our
success at managing the risks involved in the foregoing.
|
We
caution that the foregoing list of important factors is not exhaustive. Also, we
do not undertake to update any forward-looking statement, whether written or
oral, that may be made from time to time by us or on our behalf.
Executive
Overview
CCBG is a
financial holding company and a bank holding company headquartered in
Tallahassee, Florida that provides through its wholly owned subsidiary, Capital
City Bank, a broad array of products and services in 17 Florida counties, four
Georgia counties, and one Alabama county. Capital City Bank also has mortgage
lending offices in four additional Florida communities. Capital City Bank offers
commercial and retail banking services, as well as trust and asset management,
brokerage, and data processing services.
From an
industry and national perspective, CCBG’s 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, to a lesser extent,
non-interest income such as service charges on deposit accounts, trust service
fees, mortgage banking revenues, and data processing revenues. Economic
conditions, competition and the monetary and fiscal policies of the Federal
government in general, significantly affect financial institutions, including
CCBG. During 2003, the Federal government’s focus was marked by steady low
interest rates intended to stabilize the current economy and to provide
stimulation to future industrial economic growth. Lending activities are also
significantly influenced by regional and local economic factors. Some specific
factors may include the demand for and supply of housing, competition among
lenders, interest rate conditions and prevailing market rates on competing
investments, customer preferences and levels of personal income and savings in
CCBG’s primary market area.
CCBG’s
philosophy is to grow and prosper, building long-term relationships based on
quality service, high ethical standards, and safe and sound banking practices.
CCBG is a super-community bank in the relationship banking business with a
locally oriented, community-based focus, which is augmented by experienced,
centralized support in select specialized areas. CCBG’s local market orientation
is reflected in its network of banking office locations, experienced community
executives, and community advisory boards which support CCBG’s focus of
responding to local banking needs. CCBG strives to offer a broad array of
sophisticated products and to provide quality service by empowering associates
to make decisions in their local markets.
CCBG
plans to continue its expansion, emphasizing a combination of growth in existing
markets and acquisitions. Acquisitions will be focused on a three state area
including Florida, Georgia, and Alabama with a particular focus on acquiring
banks and branches, which are $100 million to $400 million in asset size,
located on the outskirts of major metropolitan areas. CCBG will 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, insurance, and mortgage banking. Management
anticipates that roughly half of CCBG's future earnings growth will be generated
through growth in existing markets and half through acquisitions.
Pending
Acquisition
On
January 8, 2004, CCBG announced the signing of a definitive agreement to acquire
Quincy State Bank, located in Quincy, Florida from Synovus Financial Corp.
Quincy State Bank is a $127 million asset institution (as of December 31, 2003)
with offices in Quincy and Havana, Florida. Both markets adjoin Leon County,
home to CCBG’s Tallahassee headquarters. The purchase price is $26.1 million in
cash and the closing is scheduled for late in the first quarter of
2004.
Previous
Acquisitions
On March
9, 2001, CCBG completed a purchase and assumption transaction with Wachovia
Bank, NA, formerly First Union National Bank ("Wachovia") and acquired six of
Wachovia's offices in Georgia which included real estate, loans and deposits.
The transaction resulted in approximately $11.3 million in intangible assets,
primarily core deposit intangibles, which are being amortized over a 10-year
period. CCBG purchased approximately $18 million in loans and assumed deposits
of approximately $105 million.
On March
2, 2001, CCBG completed its acquisition of First Bankshares of West Point, Inc.,
and its subsidiary, First National Bank of West Point. At the time of the
acquisition, First National Bank of West Point had approximately $144 million in
assets with one office in West Point, Georgia, and two offices in the Greater
Valley area of Alabama. First Bankshares of West Point, Inc., merged with CCBG,
and First National Bank of West Point merged with Capital City Bank. CCBG issued
3.6419 shares and $17.7543 in cash for each of the 192,481 outstanding shares of
First Bankshares of West Point, Inc., resulting in the issuance of 701,000
shares of CCBG common stock and the payment of $3.4 million in cash for a total
purchase price of approximately $17.0 million. The transaction was accounted for
as a purchase and resulted in approximately $2.5 million of intangible assets,
primarily goodwill.
Earnings
Analysis
Earnings
for 2003 totaled $25.2 million, or $1.90 per diluted share. This compares to
$23.1 million, or $1.74 per diluted share in 2002, and $16.9 million, or $1.27
per diluted share in 2001. Return on average assets was 1.40% and return on
average shareowners' equity was 12.82% for 2003, compared to 2002’s results of
1.34% and 12.85%, respectively, and 2001’s performance of .99% and 10.00%,
respectively.
The
increase in 2003 earnings was primarily attributable to growth in operating
revenues (defined as the total of net interest income and noninterest income) of
5.8%, driven by 16.2% growth in noninterest income. The increase in noninterest
income reflects higher deposit fees, merchant service fee income and mortgage
banking revenues. These and other significant factors are discussed throughout
the Financial Review. A condensed earnings summary is presented in Table
1.
Table 1
Condensed
Summary Of Earnings
(Dollars
in Thousands, Except Per Share Data)
|
|
|
For the Years Ended December
31, |
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income |
|
$ |
99,487 |
|
$ |
106,095 |
|
$ |
118,983 |
|
Taxable
Equivalent Adjustments |
|
|
1,413 |
|
|
1,682 |
|
|
1,775 |
|
Total
Interest Income (FTE) |
|
|
100,900 |
|
|
107,777 |
|
|
120,758 |
|
Interest
Expense |
|
|
14,839 |
|
|
22,503 |
|
|
48,249 |
|
Net
Interest Income (FTE) |
|
|
86,061 |
|
|
85,274 |
|
|
72,509 |
|
Provision
for Loan Losses |
|
|
3,436 |
|
|
3,297 |
|
|
3,983 |
|
Taxable
Equivalent Adjustments |
|
|
1,413 |
|
|
1,682 |
|
|
1,775 |
|
Net
Interest Income After Provision for Loan Losses |
|
|
81,212 |
|
|
80,295 |
|
|
66,751 |
|
Noninterest
Income |
|
|
41,939 |
|
|
36,103 |
|
|
31,159 |
|
Noninterest
Expense |
|
|
84,378 |
|
|
80,625 |
|
|
71,926 |
|
Income
Before Income Taxes |
|
|
38,773 |
|
|
35,773 |
|
|
25,984 |
|
Income
Taxes |
|
|
13,580 |
|
|
12,691 |
|
|
9,118 |
|
Net
Income |
|
$ |
25,193 |
|
$ |
23,082 |
|
$ |
16,866 |
|
Basic
Net Income Per Share |
|
$ |
1.91 |
|
$ |
1.75 |
|
$ |
1.27 |
|
Diluted
Net Income Per Share |
|
$ |
1.90 |
|
$ |
1.74 |
|
$ |
1.27 |
|
Net
Interest Income
Net
interest income represents CCBG's 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. An analysis of CCBG's net interest income,
including average yields and rates, is presented in Tables 2 and 3. This
information
is
presented 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 2003,
taxable equivalent net interest income increased $787,000, or 1.0%. This follows
an increase of $12.8 million, or 17.6%, in 2002, and $7.8 million, or 12.1%, in
2001. The favorable impact was a result of lower funding costs and a shift in
earning assets mix, partially offset by declining asset yields attributable to
the low interest rate environment. Lower interest rates paid on deposit products
and a favorable shift in deposit mix led to a net reduction in interest expense
of $7.7 million over 2002. This favorable variance continued to be partially
offset by declining yields on earning assets, which produced a decline in
taxable equivalent interest income of $6.9 million. Over the last three years,
management has aggressively repriced interest bearing liabilities in response to
the Federal Reserve's reduction in its target rate on overnight
funds.
Table
2
Average
Balances and Interest Rates
(Taxable
Equivalent Basis - Dollars in Thousands)
|
|
2003 |
|
2002 |
|
2001 |
|
|
|
Average Balance |
|
Interest |
|
Average Rate |
|
Average Balance |
|
Interest |
|
Average Rate |
|
Average Balance |
|
Interest |
|
Average Rate |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
Net of Unearned Interest(1)(2) |
|
$ |
1,318,080 |
|
$ |
92,264 |
|
|
7.00 |
% |
$ |
1,256,107 |
|
$ |
95,222 |
|
|
7.58 |
% |
$ |
1,184,290 |
|
$ |
102,737 |
|
|
8.68 |
% |
Taxable
Investment Securities |
|
|
124,541 |
|
|
3,724 |
|
|
2.98 |
|
|
135,865 |
|
|
6,941 |
|
|
5.11 |
|
|
170,328 |
|
|
9,619 |
|
|
5.65 |
|
Tax-Exempt
Investment Securities(2) |
|
|
61,387 |
|
|
3,651 |
|
|
5.95 |
|
|
68,915 |
|
|
4,133 |
|
|
6.00 |
|
|
78,928 |
|
|
4,792 |
|
|
6.07 |
|
Funds
Sold |
|
|
120,672 |
|
|
1,261 |
|
|
1.03 |
|
|
95,613 |
|
|
1,481 |
|
|
1.53 |
|
|
101,002 |
|
|
3,610 |
|
|
3.55 |
|
Total
Earning Assets |
|
|
1,624,680 |
|
|
100,900 |
|
|
6.21 |
|
|
1,556,500 |
|
|
107,777 |
|
|
6.92 |
|
|
1,534,548 |
|
|
120,758 |
|
|
7.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
& Due From Banks |
|
|
79,625 |
|
|
|
|
|
|
|
|
72,960 |
|
|
|
|
|
|
|
|
69,242 |
|
|
|
|
|
|
|
Allowance
For Loan Losses |
|
|
(12,544 |
) |
|
|
|
|
|
|
|
(12,409 |
) |
|
|
|
|
|
|
|
(11,910 |
) |
|
|
|
|
|
|
Other
Assets |
|
|
113,134 |
|
|
|
|
|
|
|
|
110,129 |
|
|
|
|
|
|
|
|
112,287 |
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
1,804,895 |
|
|
|
|
|
|
|
$ |
1,727,180
|
|
|
|
|
|
|
|
$ |
1,704,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW
Accounts |
|
|
264,159 |
|
|
676 |
|
|
0.26 |
% |
|
241,873 |
|
|
1,272 |
|
|
0.53 |
% |
|
214,881 |
|
|
4,046 |
|
|
1.88 |
% |
Money
Market Accounts |
|
|
215,597 |
|
|
1,312 |
|
|
0.61 |
|
|
224,275 |
|
|
2,904 |
|
|
1.30 |
|
|
208,526 |
|
|
6,237 |
|
|
2.99 |
|
Savings
Accounts |
|
|
109,837 |
|
|
189 |
|
|
0.17 |
|
|
104,967 |
|
|
500 |
|
|
0.48 |
|
|
108,284 |
|
|
1,865 |
|
|
1.72 |
|
Time
Deposits |
|
|
433,176 |
|
|
9,390 |
|
|
2.17 |
|
|
493,956 |
|
|
15,875 |
|
|
3.21 |
|
|
604,909 |
|
|
33,066 |
|
|
5.47 |
|
Total
Interest Bearing Deposits |
|
|
1,022,769 |
|
|
11,567 |
|
|
1.13 |
|
|
1,065,071 |
|
|
20,551 |
|
|
1.93 |
|
|
1,136,600 |
|
|
45,214 |
|
|
3.98 |
|
Short-Term
Borrowings |
|
|
101,274 |
|
|
1,270 |
|
|
1.25 |
|
|
72,594 |
|
|
767 |
|
|
1.06 |
|
|
58,111 |
|
|
2,164 |
|
|
3.72 |
|
Long-Term
Debt |
|
|
55,594 |
|
|
2,002 |
|
|
3.60 |
|
|
30,423 |
|
|
1,185 |
|
|
3.90 |
|
|
15,308 |
|
|
871 |
|
|
5.69 |
|
Total
Interest Bearing Liabilities |
|
|
1,179,637 |
|
|
14,839 |
|
|
1.26 |
|
|
1,168,088 |
|
|
22,503 |
|
|
1.93 |
|
|
1,210,019 |
|
|
48,249 |
|
|
3.99 |
|
Noninterest
Bearing Deposits |
|
|
409,039 |
|
|
|
|
|
|
|
|
359,928 |
|
|
|
|
|
|
|
|
306,316 |
|
|
|
|
|
|
|
Other
Liabilities |
|
|
19,631 |
|
|
|
|
|
|
|
|
19,512 |
|
|
|
|
|
|
|
|
19,180 |
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
|
1,608,307 |
|
|
|
|
|
|
|
|
1,547,528 |
|
|
|
|
|
|
|
|
1,535,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareowners'
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
|
132 |
|
|
|
|
|
|
|
|
132 |
|
|
|
|
|
|
|
|
132 |
|
|
|
|
|
|
|
Additional
Paid-In Capital |
|
|
15,272 |
|
|
|
|
|
|
|
|
15,386 |
|
|
|
|
|
|
|
|
18,940 |
|
|
|
|
|
|
|
Retained
Earnings |
|
|
181,184 |
|
|
|
|
|
|
|
|
164,184 |
|
|
|
|
|
|
|
|
149,580 |
|
|
|
|
|
|
|
TOTAL
SHAREOWNERS' EQUITY |
|
|
196,588 |
|
|
|
|
|
|
|
|
179,652 |
|
|
|
|
|
|
|
|
168,652 |
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREOWNERS'
EQUITY |
|
$ |
1,804,895 |
|
|
|
|
|
|
|
$ |
1,727,180 |
|
|
|
|
|
|
|
$ |
1,704,167 |
|
|
|
|
|
|
|
Interest
Rate Spread |
|
|
|
|
|
|
|
|
4.95 |
% |
|
|
|
|
|
|
|
4.99 |
% |
|
|
|
|
|
|
|
3.88 |
% |
Net
Interest Income |
|
|
|
|
$ |
86,061 |
|
|
|
|
|
|
|
$ |
85,274 |
|
|
|
|
|
|
|
$ |
72,509 |
|
|
|
|
Net
Interest Margin(3) |
|
|
|
|
|
|
|
|
5.30 |
% |
|
|
|
|
|
|
|
5.47 |
% |
|
|
|
|
|
|
|
4.73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
balances include nonaccrual loans. Interest income includes fees on loans of
approximately $6.4 million, $4.6 million and $4.3 million in 2003, 2002 and
2001, respectively.
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.
Taxable
equivalent net interest income divided by average earning
assets.
Table
3
Rate/Volume
Analysis(1)
(Taxable
Equivalent Basis - Dollars in Thousands)
|
|
2003 Changes from 2002 |
|
2002 Changes from 2001 |
|
|
|
|
|
|
Due To Average |
|
|
|
|
Due
to Average |
|
|
|
|
Total |
|
|
Volume |
|
|
Rate |
|
|
Total |
|
|
Volume |
|
|
Rate |
|
Earning
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
Net of Unearned Interest(2) |
|
$ |
(2,958 |
) |
$ |
5,916 |
|
$ |
(8,874 |
) |
$ |
(7,515 |
) |
$ |
6,698 |
|
$ |
(14,213 |
) |
Investment
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
(3,217 |
) |
|
(2,448 |
) |
|
(769 |
) |
|
(2,678 |
) |
|
(1,987 |
) |
|
(691 |
) |
Tax-Exempt |
|
|
(482 |
) |
|
(450 |
) |
|
(32 |
) |
|
(659 |
) |
|
(608 |
) |
|
(51 |
) |
Funds
Sold |
|
|
(220 |
) |
|
389 |
|
|
(609 |
) |
|
(2,129 |
) |
|
(215 |
) |
|
(1,914 |
) |
Total |
|
|
(6,877 |
) |
|
3,407 |
|
|
(10,284 |
) |
|
(12,981 |
) |
|
3,888 |
|
|
(16,869 |
) |
Interest
Bearing Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW
Accounts |
|
|
(596 |
) |
|
117 |
|
|
(713 |
) |
|
(2,774 |
) |
|
509 |
|
|
(3,283 |
) |
Money
Market Accounts |
|
|
(1,592 |
) |
|
(111 |
) |
|
(1,481 |
) |
|
(3,333 |
) |
|
471 |
|
|
(3,804 |
) |
Savings
Accounts |
|
|
(311 |
) |
|
23 |
|
|
(334 |
) |
|
(1,365 |
) |
|
(57 |
) |
|
(1,308 |
) |
Time
Deposits |
|
|
(6,485 |
) |
|
(1,953 |
) |
|
(4,532 |
) |
|
(17,191 |
) |
|
(6,065 |
) |
|
(11,126 |
) |
Short-Term
Borrowings |
|
|
503 |
|
|
578 |
|
|
(75 |
) |
|
(1,397 |
) |
|
447 |
|
|
(1,844 |
) |
Long-Term
Debt |
|
|
817 |
|
|
981 |
|
|
(164 |
) |
|
314 |
|
|
860 |
|
|
(546 |
) |
Total |
|
|
(7,664 |
) |
|
(365 |
) |
|
(7,299 |
) |
|
(25,746 |
) |
|
|
|
|
(21,911 |
) |
Changes
in Net Interest Income |
|
$ |
787 |
|
$ |
3,772 |
|
$ |
(2,985 |
) |
$ |
12,765 |
|
$ |
7,723 |
|
$ |
5,042 |
|
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.
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.
For the
year 2003, taxable equivalent interest income decreased $6.9 million, or 6.4%,
over 2002, and $13.0 million, or 10.7%, in 2002 over 2001. New loan production
and repricing of existing earning assets produced a 71 basis point reduction in
the yield on earning assets, which declined from 6.92% for 2002 to 6.21% for
2003. This compares to a 95 basis point reduction in 2002 over 2001. The
unfavorable impact of declining yields was partially mitigated by growth in
earning assets of $68.2 million, which produced an overall improvement in the
mix. The yield on the investment securities portfolio continued to decline as a
result of the low rate environment. As shown in Table 3, both the investment and
loan portfolios were significant contributors to the net reduction in interest
income. In the current rate environment, portfolio repricing will continue to
put pressure on interest income, but may be partially or completely offset by
earning asset growth.
Interest
expense decreased $7.7 million, or 34.1%, over 2002, and $25.7 million, or
53.4%, in 2002 over 2001. The general decline in interest rates produced
favorable rate variances on interest bearing liabilities throughout the year.
This was further enhanced by a favorable shift in mix, as certificates of
deposit (generally a higher cost deposit product) declined relative to total
deposits. Certificates of deposit, as a percent of total average deposits,
declined from 34.7% in 2002 to 30.2% in 2003. Lower interest rates and a
favorable shift in mix led to a decline in the average rate paid on interest
bearing liabilities in 2003 of 67 basis points compared to 2002.
CCBG's
interest rate spread (defined as the taxable equivalent yield on average earning
assets less the average rate paid on interest bearing liabilities) decreased 4
basis points in 2003 and increased 111 basis points in 2002. The decrease in
2003 was attributable to the continued decline in the earning asset yield. The
significant increase in 2002 is attributable to management's ability to rapidly
adjust the average rate paid on interest bearing liabilities relative to the
decline in yield on earning assets.
CCBG's
net interest margin (defined as taxable equivalent interest income less interest
expense divided by average earning assets) was 5.30% in 2003, compared to 5.47%
in 2002 and 4.73% in 2001. In 2003, the lower yields on earning assets
(partially offset by lower rates paid on interest bearing liabilities) resulted
in the 17 basis point decline in the margin.
Loan
growth is anticipated to have a favorable impact on the net interest margin
during the upcoming year along with any favorable changes in the Federal
Reserve's target rate on overnight funds. However, depending on the magnitude of
the loan growth, the improvement attributable to growth may be partially or
completely offset by unfavorable repricing variances associated with loans and
securities and any further unfavorable changes in the Federal Reserve's target
rate on overnight funds. A further discussion of CCBG's earning assets and
funding sources can be found in the section entitled "Financial
Condition."
Provision
for Loan Losses
The
provision for loan losses was $3.4 million in 2003, compared to $3.3 million in
2002 and $4.0 million in 2001. The slight increase in the 2003 provision
reflects a slightly higher level of net charge-offs. CCBG’s stable provision
over the last three-year period reflects continued stable credit quality
supported by an adequate allowance for loan losses.
Net
charge-offs remain at historically low levels relative to the size of the
portfolio. Net
charge-offs for 2003 totaled $3.5 million, or .27% of average loans.
This
compares to $2.9 million, or .23% for 2002. The increase is due primarily to a
higher level of consumer loan net charge-offs, primarily automobile loans. In
addition, the increase in 2003 over 2002 is reflective of an above normal level
of consumer loan recoveries in 2002.
At
December 31, 2003, the allowance for loan losses totaled $12.4 million compared
to $12.5 million in 2002. At year-end 2003, the allowance represented 0.93% of
total loans and provided coverage of 530% of nonperforming loans. Management
considers the allowance to be adequate based on the current level of
nonperforming loans and the estimate of losses inherent in the portfolio at
year-end. See the section entitled "Financial Condition" and Tables 7 and 8 for
further information regarding the allowance for loan losses.
Noninterest
Income
In 2003,
noninterest income increased $5.8 million, or 16.2%, and represented 33.1% of
operating revenue, compared to an increase of $4.9 million, or 15.9%, and 30.2%,
respectively, in 2002. The increase in the level of noninterest income is
attributable primarily to growth in deposit service charges, merchant service
fee income, and mortgage banking revenues. The increase in 2002 was attributable
to growth in deposit service charges, mortgage banking revenues, and other
income (primarily retail brokerage fees and ATM/debit/credit card transaction
fees). Factors affecting noninterest income are discussed below.
Service
charges on deposit accounts increased $3.6 million, or 28.0%, in 2003, compared
to an increase of $2.1 million, or 19.7%, in 2002. Service charge revenues in
any one year are dependent on the number of accounts, primarily transaction
accounts, the level of activity subject to service charges, and the collection
rate. The increase in service charges in 2003 was primarily attributable to
growth in NSF/overdraft fees associated with a new overdraft protection program
implemented in the fourth quarter of 2002. Integration of acquisitions during
2004 will further enhance deposit service charge revenues. The increase in
service charges in 2002 reflects an increase in the number of deposit accounts,
primarily attributable to the 2001 Georgia banking office acquisitions, and
increased NSF/overdraft fees in the fourth quarter of 2002.
Data
processing revenues increased $396,000, or 19.8%, in 2003 versus a decrease of
$73,000, or 3.5%, in 2002. The data processing center provides computer services
to both financial and non-financial clients in North Florida and South Georgia.
The increase in 2003 was due to higher revenues from both financial clients and
government contract processing. CCBG added one financial client in late 2002
increasing the number currently being processed to six. In addition, government
contract processing increased 20.0% during 2003 primarily due to increased
processing volume with one client. In 2003, processing revenues for
non-financial entities represented approximately 39.3% of total processing,
compared to 41.5% in 2002. The decrease in total processing revenues for 2002
was primarily the result of a decline in revenues for financial clients.
Management expects data processing revenues to remain stable during 2004.
In 2003,
asset management fees increased $129,000, or 5.1%, versus a decrease of $35,000,
or 1.4%, in 2002. At year-end 2003, assets under management totaled $404
million, reflecting growth of $61 million, or 17.8% over 2002. This growth is
due to an increase in new business in existing markets and appreciation in stock
market values over 2002. At year-end 2002, assets under management totaled $343
million, reflecting growth of $6.0 million, or 1.8% over 2001.
CCBG
continues to be among the leaders in the production of residential mortgage
loans in many of its markets. In 2003, mortgage banking revenues increased
$588,000, or 10.7%, compared to $2.4 million, or 75.3% in 2002. The increase in
2003 was due to the continued low interest rate environment resulting in a high
level of fixed rate loan production through the third quarter of the year. CCBG
generally sells all fixed rate residential loan production into the secondary
market. Fixed rate mortgage refinancing activity slowed significantly in the
fourth quarter of 2003 and as a result mortgage banking revenues declined in the
fourth quarter. Management does not expect mortgage banking revenues to remain
at the levels experienced in 2003. The increase in revenue in 2002 was due to
higher fixed rate mortgage production driven by the low interest rate
environment, and a gain (pre-tax) of $675,000 on the one-time sale of $23.5
million in residential mortgage loans during the fourth quarter of 2002. The
level of interest rates, origination volume and percent of fixed rate production
have a significant impact on CCBG’s mortgage banking revenues.
Other
noninterest income increased $1.2 million, or 8.7%, in 2003 versus an increase
of $580,000, or 4.5% in 2002. The increase in 2003 was attributable primarily to
an increase in merchant service fee income and miscellaneous recoveries.
Merchant service fee income increased $848,000, or 22.8%, due to increased
transaction volume and was partially offset with higher interchange service
fees, which is reflected in noninterest expense. Miscellaneous recoveries were
$241,000, or 86.5%, higher as a result of recovering legal and settlement costs
associated with two lawsuits. The 2002 increase in noninterest income was
attributable primarily to higher retail brokerage fees and ATM/debit/credit card
transaction fees.
Noninterest
income as a percent of average assets increased to 2.32% in 2003, compared to
2.09% in 2002, and 1.83% in 2001, driven primarily by service charge income,
mortgage banking revenues and merchant service fee income.
Noninterest
Expense
Noninterest
expense for 2003 was $84.4 million, an increase of $3.8 million, or 4.7%, over
2002, compared with an increase of $8.7 million, or 12.1%, in 2002. Factors
impacting CCBG's noninterest expense during 2003 and 2002 are discussed
below.
CCBG's
aggregate compensation expense in 2003 totaled $45.1 million, an increase of
$3.0 million, or 7.1%, over 2002. The increase is primarily attributable to
associate salary increases, higher performance-based compensation (commissions),
increased pension costs, and higher healthcare insurance premiums. The increase
in associate salaries reflects normal annual merit increases and higher
performance-based compensation, which is reflective of higher commissions paid
to mortgage originators. The higher pension cost is a result of an increase in
the number of plan participants and the lower than expected return on plan
assets resulting from the general stock market decline in recent years. Pension
costs are expected to increase in 2004 by approximately 13%. Healthcare premiums
are expected to continue to increase due to additional participants and rising
costs from healthcare providers. In 2002, aggregate compensation increased $5.3
million, or 14.5%, over 2001. This increase was primarily due to the addition of
Georgia and Alabama offices, higher performance-based compensation (profit
participation, commissions, and incentives), increased pension costs, and higher
healthcare insurance premiums.
Occupancy
expense (including furniture, fixtures and equipment) increased by $416,000, or
3.1%, in 2003, compared to $726,000, or 5.7% in 2002. The increase in 2003 was
primarily due to higher furniture/fixture, utility, and building
depreciation
expenses associated with the addition of four new offices. The increase in 2002
was primarily due to the addition of nine offices associated with the Georgia
acquisitions, and costs associated with the conversion and full implementation
of a new data processing system. Additional increases were experienced for 2002
in office leases and building maintenance/repairs.
Other
noninterest expense increased $360,000, or 1.4%, in 2003, compared to $2.6
million, or 11.7%, in 2002. The increase in 2003 was attributable to: (1) higher
legal costs of $106,000 primarily resulting from corporate governance compliance
work associated with the Sarbanes-Oxley Act; (2) increased processing expenses
of $272,000 associated with implementation of new database systems in human
resources, and custom programming work performed by Capital City Bank’s core
processing system vendor to facilitate the implementation of new applications
(platform automation and home banking); and (3) increased interchange service
fees of $717,000 associated with higher merchant card processing volume. These
increases were partially offset with approximately $617,000 lower expense for
contingency reserves, and lower seminar/education expense of
$123,000.
The
increase in 2002 was attributable to: (1) higher legal costs of $351,000
primarily resulting from merchant credit card processing; (2) increased
professional fees associated with external audit, tax and pension consulting of
$594,000; (3) increased processing expenses of $390,000 associated with
customization of a newly implemented data processing system, increased ATM
processing and trust account processing; (4) increased contributions of $175,000
attributable to increased funding for Capital City Bank Group Foundation, Inc.;
(5) increased telephone costs of $215,000 resulting from Georgia acquisitions
and line upgrades to the existing wide-area network; and (6) higher
miscellaneous expense of $1.2 million attributable to: loan underwriting/closing
costs ($302,000), other losses/cash short ($304,000), credit card interchange
fees ($262,000), seminars/education ($139,000), and other miscellaneous
($248,000).
The net
noninterest expense ratio (defined as noninterest income minus noninterest
expense, net of intangible amortization and conversion/merger-related expenses,
as a percent of average assets) was 2.17% in 2003 compared to 2.38% in 2002, and
2.14% in 2001. CCBG's efficiency ratio (expressed as noninterest expense, net of
intangible amortization and conversion/merger-related expenses, as a percent of
taxable equivalent operating revenues) was 63.4%, 63.6%, and 65.2% in 2003, 2002
and 2001, respectively.
Income
Taxes
The
consolidated provision for federal and state income taxes was $13.6 million in
2003, compared to $12.7 million in 2002, and $9.1 million in 2001. The increase
in the 2003 tax provision was a result of higher taxable income and a decline in
tax exempt income. The increase in the 2002 tax provision from 2001 was also due
to higher taxable income and lower tax exempt income.
The
effective tax rate was 35.0% in 2003, 35.5% in 2002, and 35.1% in 2001. The
decrease in the effective tax rate for 2003 is due to an adjustment in federal
income tax expense in the amount of $500,000 made during the fourth quarter of
2003. Following a recent IRS examination, CCBG performed an evaluation of all
its tax accounts. Upon completion of this analysis in the fourth quarter of
2003, CCBG determined certain tax accounts should be adjusted to more
appropriately reflect its current and deferred assets and liabilities. The
effective tax rates previously noted differ from the combined federal and state
statutory tax rates due primarily to tax-exempt income.
The
increase in the effective tax rate for 2002 was primarily attributable to an
increase in state taxable income as well as a decline of tax-exempt income
relative to pre-tax income.
Financial
Condition
Average
assets totaled $1.8 billion, an increase of $78.0 million, or 4.5%, in 2003
versus the comparable period in 2002. Average earning assets for 2003 were $1.6
billion, representing an increase of $68.0 million, or 4.4%, over 2002. During
2003, average loans increased $62.0 million, or 4.9%, and average funds sold
increased $25.1 million, or 26.2%. These increases were partially offset by a
decline in average securities of $19.0 million, or 9.2%. Loan growth during 2003
was primarily funded through existing liquidity and deposit growth.
Table 2
provides information on average balances and rates, Table 3 provides an analysis
of rate and volume variances, while Table 4 highlights the changing mix of
CCBG's earning assets over the last three years.
Loans
Average
loans increased $62.0 million, or 4.9%, over the comparable period in 2002. Loan
growth was slow for the first quarter of the year, but picked up momentum during
the second and third quarters. Loans, on average, increased $27.5 million in the
second quarter and $19.4 million in the third quarter. Loan growth fell off
during the fourth quarter primarily due to a decline in the residential
held-for-sale loan portfolio. Loans as a percent of average earning assets
increased to 81.1% for the year, compared to 80.7% for the comparable period of
2002. Loan growth occurred in all loan categories during the year with the
exception of residential 1-4 family. The decline in the residential 1-4 family
was due to a decline in held-for-sale loans resulting from a slow down in
refinancing activity during the fourth quarter of 2003. Management anticipates
that the pace of loan refinancing will slow in 2004 resulting in loan production
producing greater net growth for the total loan portfolio.
Although
management is continually evaluating alternative sources of revenue, lending is
a major component of CCBG's business and is key to profitability. While
management strives to identify opportunities to increase loans outstanding and
enhance the portfolio's overall contribution to earnings, it can do so only by
adhering to sound lending principles applied in a prudent and consistent manner.
Thus, management will not relax its underwriting standards in order to achieve
designated growth goals.
Table
4
Sources
of Earning Asset Growth
(Average
Balances - Dollars in Thousands)
|
|
|
|
|
|
Components of
Average Earning Assets |
|
|
|
2002 to 2003
Change |
|
Percentage of
Total Change |
|
2003 |
|
2002 |
|
2001 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
Commercial,
Financial and Agricultural |
|
$ |
16,100 |
|
|
23.6 |
% |
|
9.2 |
% |
|
8.6 |
% |
|
8.0 |
% |
Real
Estate - Construction |
|
|
7,996 |
|
|
11.7 |
|
|
5.5 |
|
|
5.3 |
|
|
5.3 |
|
Real
Estate - Commercial Mortgage |
|
|
57,250 |
|
|
|
|
|
|
|
|
|
|
|
17.6 |
|
Real
Estate - Residential |
|
|
(35,386 |
) |
|
(51.9 |
) |
|
29.1 |
|
|
32.6 |
|
|
32.8 |
|
Consumer |
|
|
16,013 |
|
|
23.5 |
|
|
13.9 |
|
|
13.5 |
|
|
13.5 |
|
Total
Loans |
|
|
61,973 |
|
|
90.9 |
|
|
81.1 |
|
|
80.7 |
|
|
77.2 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
(11,324 |
) |
|
(16.6 |
) |
|
7.7 |
|
|
8.8 |
|
|
11.1 |
|
Tax-Exempt |
|
|
(7,528 |
) |
|
(11.1 |
) |
|
3.8 |
|
|
4.4 |
|
|
5.1 |
|
Total
Securities |
|
|
(18,852 |
) |
|
(27.7 |
) |
|
11.5 |
|
|
13.2 |
|
|
16.2 |
|
Funds
Sold |
|
|
25,059 |
|
|
36.8 |
|
|
7.4 |
|
|
6.1 |
|
|
6.6 |
|
Total
Earning Assets |
|
$ |
68,180 |
|
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
CCBG's
average loan-to-deposit ratio increased to 92.1% in 2003 from 88.1% in 2002.
This compares to an average loan-to-deposit ratio in 2001 of 82.1%. The higher
average loan-to-deposit ratio in 2003 primarily reflects higher loan growth.
Real
estate loans, combined, represented 70.7% of total loans at December 31, 2003,
versus 71.7% in 2002. This decline from the prior year reflects the decline in
1-4 family residential loans discussed above. See the section entitled "Risk
Element Assets" for a discussion concerning loan concentrations.
The
composition of CCBG's loan portfolio at December 31, for each of the past five
years is shown in Table 5. Table 6 arrays CCBG's total loan portfolio as of
December 31, 2003, based upon maturities. As a percent of the total portfolio,
loans with fixed interest rates represent 32.5% as of December 31, 2003, versus
32.9% at December 31, 2002.
Table
5
Loans
by Category
|
|
As of December 31, |
|
(Dollars
in Thousands) |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
Financial and Agricultural |
|
$ |
160,048 |
|
$ |
141,459 |
|
$ |
128,480 |
|
$ |
108,340 |
|
$ |
98,894 |
|
Real
Estate - Construction |
|
|
89,149 |
|
|
91,110 |
|
|
72,778 |
|
|
84,133 |
|
|
62,166 |
|
Real
Estate - Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage |
|
|
391,250 |
|
|
356,807 |
|
|
302,239 |
|
|
231,099
|
|
|
214,036 |
|
Real
Estate - Residential |
|
|
467,790 |
|
|
474,069 |
|
|
530,546 |
|
|
444,489
|
|
|
383,536 |
|
Consumer |
|
|
233,395 |
|
|
221,776 |
|
|
209,308 |
|
|
183,771
|
|
|
169,854 |
|
Total
Loans, Net of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned
Interest |
|
$ |
1,341,632 |
|
$ |
1,285,221 |
|
$ |
1,243,351 |
|
$ |
1,051,832 |
|
$ |
928,486 |
|
Table
6
Loan
Maturities
|
|
Maturity Periods |
|
|
|
(Dollars
in Thousands) |
|
One Year or Less |
|
Over Five Years Years |
|
Over One Through Five
Years |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
Commercial,
Financial and Agricultural |
|
$ |
66,448 |
|
$ |
69,703 |
|
$ |
23,896 |
|
$ |
160,048 |
|
Real
Estate |
|
|
155,684 |
|
|
126,634 |
|
|
665,871 |
|
|
948,189 |
|
Consumer(1) |
|
|
61,872 |
|
|
141,386 |
|
|
30,138 |
|
|
233,395 |
|
Total |
|
$ |
284,004 |
|
$ |
337,723 |
|
$ |
719,905 |
|
$ |
1,341,632 |
|
Loans
with Fixed Rates |
|
$ |
189,337 |
|
$ |
222,813 |
|
$ |
24,039 |
|
$ |
436,189 |
|
Loans
with Floating or |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable
Rates |
|
|
94,667 |
|
|
114,910 |
|
|
695,866 |
|
|
905,443 |
|
Total |
|
$ |
284,004 |
|
$ |
337,723 |
|
$ |
719,905 |
|
$ |
1,341,632 |
|
(1)
Demand loans and overdrafts are reported in the category of one year or
less.
Allowance
for Loan Losses
Management
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 and 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 loan
loss reserve. The allowance for loan losses is established through a provision
charged to expense. Loans are charged against the
allowance when management believes collection of the principal is unlikely. The
allowance for loan losses is based on management's judgment of overall loan
quality. This is a significant estimate based on a detailed analysis of the loan
portfolio. The balance can and will change based on changes in the assessment of
the portfolio's overall credit quality.
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.
Impaired loans are defined as those in which the full collection of principal
and interest in accordance with the contractual terms is improbable. Impaired
loans generally include those that are past due for 90 days or more and
those
classified as doubtful in accordance with CCBG’s risk rating system. Loans
classified as doubtful have a high possibility of loss, but because of certain
factors that may work to strengthen the loan, its classification as a loss is
deferred until a more exact status may be determined. Not all loans are
considered in the review for impairment; only loans that are for business
purposes exceeding $25,000 are considered. The evaluation is based on current
financial condition 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 loan’s 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 assigned to 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 commercial
purpose loans exceeding $100,000 that are not impaired, but that have weaknesses
requiring closer management attention. General reserves are also assigned to
commercial purpose loans exceeding $100,000 that do not exhibit weaknesses
requiring closer monitoring. Finally, general reserves are assigned to large
groups of smaller-balance homogenous loans, including commercial purpose loans
less than $100,000, consumer loans, credit card loans and residential mortgage
loans.
Large
commercial purpose loans exhibiting specific weaknesses are detailed in a
monthly Problem Loan Report. These loans are divided into ten different pools
based on various risk characteristics and the underlying value of collateral
taken to secure specific loans within the pools. These classified loans are
monitored for changes in risk ratings that are assigned based on Capital City
Bank’s Asset Classification Policy, and for the ultimate disposition of the
loan. The ultimate disposition may include upgrades in risk ratings, payoff of
the loan, or charge-off of the loan. This migration analysis results in a
charge-off ratio by loan pool of classified loans that is applied to the balance
of the pool to determine general reserves for specifically identified problem
loans. This charge-off ratio is adjusted for various environmental factors
including past due and nonperforming trends in the loan portfolio, the micro-and
macro-economic outlook, and credit administration practices as determined by
independent parties.
General
reserves are assigned to large commercial purpose loans exceeding $100,000 that
do not exhibit weaknesses and pools of smaller-balance homogenous loans based on
calculated overall charge-off ratios over the past three years. The charge-off
ratios applied are adjusted as detailed above, with further consideration given
to the highest charge-off experience of Capital City Bank dating back to the
recession of the late 1980s.
The
allowance for loan losses is compared against the sum of the specific reserves
assigned to problem loans plus the general reserves assigned to pools of loans
that are not specific problem loans. Adjustments are made when appropriate. A
most likely reserve value is determined within the computed range of required
calculated reserve, with the actual allowance for loan losses compared to the
most likely reserve value. The unallocated reserve is monitored on a regular
basis and
adjusted
based on qualitative factors. Table 7 analyzes the activity in the allowance
over the past five years.
Table
7
Analysis
of Allowance For Loan Losses
|
|
For the Years Ended December 31, |
|
(Dollars
in Thousands) |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
1999 |
|
Balance
at Beginning of Year |
|
$ |
12,495 |
|
$ |
12,096 |
|
$ |
10,564 |
|
$ |
9,929 |
|
$ |
9,827 |
|
Acquired
Reserves |
|
|
— |
|
|
— |
|
|
1,206 |
|
|
— |
|
|
— |
|
Charge-Offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Agricultural |
|
|
426 |
|
|
818 |
|
|
483 |
|
|
626 |
|
|
480 |
|
Real
Estate - Construction |
|
|
— |
|
|
— |
|
|
— |
|
|
7 |
|
|
— |
|
Real
Estate - Commercial Mortgage |
|
|
91 |
|
|
— |
|
|
32 |
|
|
— |
|
|
354 |
|
Real
Estate - Residential |
|
|
228 |
|
|
175 |
|
|
159 |
|
|
168 |
|
|
251 |
|
Consumer |
|
|
3,794 |
|
|
3,279 |
|
|
3,976 |
|
|
2,387 |
|
|
2,113 |
|
Total
Charge-Offs |
|
|
4,539 |
|
|
4,272 |
|
|
4,650 |
|
|
3,188 |
|
|
3,198 |
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Agricultural |
|
|
142 |
|
|
136 |
|
|
44 |
|
|
52 |
|
|
142 |
|
Real
Estate - Construction |
|
|
— |
|
|
— |
|
|
— |
|
|
11 |
|
|
— |
|
Real
Estate - Commercial Mortgage |
|
|
— |
|
|
20 |
|
|
65 |
|
|
73 |
|
|
84 |
|
Real
Estate - Residential |
|
|
18 |
|
|
37 |
|
|
116 |
|
|
54 |
|
|
11 |
|
Consumer |
|
|
877 |
|
|
1,181 |
|
|
768 |
|
|
513 |
|
|
623 |
|
Total
Recoveries |
|
|
1,037 |
|
|
1,374 |
|
|
993 |
|
|
703 |
|
|
860 |
|
Net
Charge-Offs |
|
|
3,502 |
|
|
2,898 |
|
|
3,657 |
|
|
2,485 |
|
|
2,338 |
|
Provision
for Loan Losses |
|
|
3,436 |
|
|
3,297 |
|
|
3,983 |
|
|
3,120 |
|
|
2,440 |
|
Balance
at End of Year |
|
$ |
12,429 |
|
$ |
12,495 |
|
$ |
12,096 |
|
$ |
10,564 |
|
$ |
9,929 |
|
Ratio
of Net Charge-Offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
Average Loans Outstanding |
|
|
.27 |
% |
|
.23 |
% |
|
.31 |
% |
|
.25 |
% |
|
.26 |
% |
Allowance
for Loan Losses as a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
of Loans at End of Year |
|
|
.93 |
% |
|
.97 |
% |
|
.97 |
% |
|
1.00 |
% |
|
1.07 |
% |
Allowance
for Loan Losses as a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multiple
of Net Charge-Offs |
|
|
3.55x |
|
|
4.31x |
|
|
3.31x |
|
|
4.25x |
|
|
4.25x |
|
The
allowance for loan losses at December 31, 2003 of $12.4 million compares to
$12.5 million at year-end 2002. The allowance as a percent of total loans was
0.93% in 2003 and 0.97% in 2002. The
allowance for loan losses as a percentage of loans reflects management’s current
estimation of the credit quality of CCBG’s loan portfolio. While there can be no
assurance that CCBG will not sustain loan losses in a particular period that are
substantial in relation to the size of the allowance, management’s
assessment of the
loan portfolio does not indicate a likelihood of this occurrence. It is
management’s opinion that the allowance at December 31, 2003 is adequate to
absorb losses inherent in the loan portfolio at year-end.
Table 8
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. The greatest losses
experienced by CCBG have occurred in the consumer loan portfolio, including
credit cards. As such, the greatest amount of the allowance is allocated to
consumer loans despite its relatively small balance. Management is constantly
reviewing the delivery, underwriting and collection of these products to reduce
loan losses.
Risk
Element Assets
Risk
element assets consist of nonaccrual loans, renegotiated loans, other real
estate, loans past due 90 days or more, potential problem loans and loan
concentrations. Table 9 depicts certain categories of CCBG’s risk element assets
as of December 31 for each of the last five years. Potential problem loans and
loan concentrations are discussed within the narrative portion of this section.
CCBG’s
nonperforming loans decreased $164,000, or 6.6% from a level of $2.5 million at
December 31, 2002, to $2.3 million at December 31, 2003. During 2003 loans
totaling approximately $9.0 million were added, while loans totaling $9.2
million were removed from nonaccruing status. A single loan of $3.7 million was
both added and removed during the year. Of the $9.2 million removed, $1.5
million consisted of principal reductions and loan payoffs, $5.1 million
represented loans transferred to other real estate, $2.4 million consisted of
loans brought current and returned to an accrual status, and $165,000 was
charged off. Where appropriate, management has allocated specific reserves to
absorb anticipated losses. The majority (83%) of CCBG’s charge-offs in 2003 were
in the consumer portfolio where loans are charged off based on past due status
and are not recorded as nonaccruing loans.
All
nonaccrual loans exceeding $25,000 not secured by 1-4 family residential
properties are reviewed quarterly for impairment. A loan is considered impaired
when it is probable that all principal and interest will not be collected
according to the contractual terms. When a loan is considered impaired, it is
reviewed for exposure to credit loss. If credit loss is probable, a specific
reserve is allocated to absorb the anticipated loss. CCBG had $1.3 million in
loans considered impaired at December 31, 2003. The anticipated loss in those
impaired loans is only $178,000.
Table
8
Allocation
of Allowance for Loan Losses
|
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
1999 |
|
(Dollars in Thousands) |
|
Allowance Amount |
|
Percent of
Loans in
Each Category
To
Total Loans |
|
Allowance Amount |
|
Percent of
Loans in
Each Category
To
Total Loans |
|
Allowance Amount |
|
Percent of
Loans in
Each Category
To
Total Loans |
|
Allowance Amount |
|
Percent of
Loans in
Each Category
To
Total Loans |
|
Allowance Amount |
|
Percent of
Loans in
Each Category
To
Total Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
Financial and Agricultural |
|
$ |
2,824 |
|
|
11.9 |
% |
$ |
2,740 |
|
|
11.0 |
% |
$ |
3,257 |
|
|
10.3 |
% |
$ |
1,423 |
|
|
10.3 |
% |
$ |
1,873 |
|
|
10.7 |
% |
Real
Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
313 |
|
|
6.6 |
|
|
348 |
|
|
7.1 |
|
|
600 |
|
|
5.9 |
|
|
424 |
|
|
8.0 |
|
|
477 |
|
|
6.7 |
|
Commercial
Mortgage |
|
|
2,831 |
|
|
29.2 |
|
|
2,559 |
|
|
27.8 |
|
|
3,098 |
|
|
24.3 |
|
|
3,157 |
|
|
22.0 |
|
|
3,228 |
|
|
23.0 |
|
Residential |
|
|
853 |
|
|
34.9 |
|
|
1,021 |
|
|
36.9 |
|
|
947 |
|
|
42.7 |
|
|
922 |
|
|
42.3 |
|
|
573 |
|
|
41.3 |
|
Consumer |
|
|
4,169 |
|
|
17.4 |
|
|
4,210 |
|
|
17.2 |
|
|
4,194 |
|
|
16.8 |
|
|
3,423 |
|
|
17.4 |
|
|
3,327 |
|
|
18.3 |
|
Not
Allocated |
|
|
1,439 |
|
|
— |
|
|
1,617 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,215 |
|
|
— |
|
|
451 |
|
|
— |
|
Total |
|
$ |
12,429 |
|
|
100.0 |
% |
$ |
12,495 |
|
|
100.0 |
% |
$ |
12,096 |
|
|
100.0 |
% |
$ |
10,564 |
|
|
100.0 |
% |
$ |
9,929 |
|
|
100.0 |
% |
Table
9
Risk
Element Assets
|
|
|
As
of December 31, |
|
(Dollars
in Thousands) |
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
|
2000 |
|
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccruing
Loans |
|
$ |
2,346 |
|
$ |
2,510 |
|
$ |
2,414 |
|
$ |
2,919 |
|
$ |
2,965 |
|
Restructured |
|
|
— |
|
|
— |
|
|
20 |
|
|
19 |
|
|
26 |
|
Total
Nonperforming Loans |
|
|
2,346 |
|
|
2,510 |
|
|
2,434 |
|
|
2,938 |
|
|
2,991 |
|
Other
Real Estate |
|
|
4,955 |
|
|
1,333 |
|
|
1,506 |
|
|
971 |
|
|
934 |
|
Total
Nonperforming Assets |
|
$ |
7,301 |
|
$ |
3,843 |
|
$ |
3,940 |
|
$ |
3,909 |
|
$ |
3,925 |
|
Past
Due 90 Days or More |
|
$ |
328 |
|
$ |
2,453 |
|
$ |
1,065 |
|
$ |
1,102 |
|
$ |
781 |
|
Nonperforming
Loans/Loans |
|
|
.17 |
% |
|
.20 |
% |
|
.20 |
% |
|
.28 |
% |
|
.32 |
% |
Nonperforming
Assets/Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus
Other Real Estate |
|
|
.54 |
% |
|
.30 |
% |
|
.32 |
% |
|
.37 |
% |
|
.42 |
% |
Nonperforming
Assets/Capital(1) |
|
|
3.39 |
% |
|
1.93 |
% |
|
2.14 |
% |
|
2.47 |
% |
|
2.76 |
% |
Reserve/Nonperforming
Loans |
|
|
529.80 |
% |
|
497.72 |
% |
|
496.96 |
% |
|
359.57 |
% |
|
331.96 |
% |
For
computation of this percentage, "capital" refers to shareowners' equity plus the
allowance for loan losses.
Interest
on nonaccrual loans is generally recognized only when received. Cash collected
on nonaccrual loans is applied against the principal balance or recognized as
interest income based upon management’s expectations as to the ultimate
collectibility of principal and interest in full. If interest on nonaccruing
loans had been recognized on a fully accruing basis, interest income recorded
would have been $166,000 higher for the year ended December 31,
2003.
Other
real estate totaled $5.0 million at December 31, 2003, versus $1.3 million at
December 31, 2002. This category includes property owned by Capital City Bank
that was acquired either through foreclosure procedures or by receiving a deed
in lieu of foreclosure. During 2003, CCBG added properties totaling $5.4
million, and partially or completely liquidated properties totaling $1.7
million, resulting in a net increase in other real estate of approximately $3.7
million. The majority of the increase is the result of foreclosing on a large
commercial building in December. The amount of the loan was $3.9 million. The
building was under contract at year-end, and was subsequently sold with no loss
of principal.
Potential
problem loans are defined as those loans which are now current but where
management has doubt as to the borrower’s ability to comply with present loan
repayment terms. Potential problem loans totaled $3.5 million at December 31,
2003.
Loans
past due 90 days or more totaled $328,000 at year-end, down from $2.4 million
from the previous year. This is primarily the result of the payoff of one loan,
and one other loan being brought current.
Loan
concentrations are considered to exist when there are amounts loaned to a
multiple number of 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 Capital City Bank and the relatively close proximity of the markets,
CCBG has both geographic concentrations as well as concentrations in the types
of loans funded. Specifically, due to the nature of CCBG’s markets, a
significant portion of the portfolio has historically been secured with real
estate.
While
CCBG has a majority of its loans secured by real estate, the primary type of
real estate collateral is 1-4 family residential properties. At December 31,
2003, approximately 70.7% of the portfolio consisted of real estate loans.
Residential properties comprise approximately 49.3% of the real estate
portfolio.
The real
estate portfolio, while subject to cyclical pressures, is not typically
speculative in nature and is originated at amounts that are within or below
regulatory guidelines for collateral values. Management anticipates no
significant reduction in the percentage of real estate loans to total loans
outstanding.
Management
is continually analyzing its loan portfolio in an effort to identify and resolve
its problem assets as quickly and efficiently as possible. As of December 31,
2003, management believes it has identified and adequately reserved for such
problem assets. However, management recognizes that many factors can adversely
impact various segments of its markets, creating financial difficulties for
certain borrowers. As such, management continues to focus its attention on
promptly identifying and providing for potential losses as they arise.
Investment
Securities
In 2003,
CCBG's average investment portfolio decreased $18.9 million, or 9.2%, from 2002
and $44.5 million, or 17.8%, from 2002 compared to 2001. As a percentage of
average earning assets, the investment portfolio represented 11.4% in 2003,
compared to 13.2% in 2002. In both years, the decline in the portfolio was
attributable to the maturities of investment securities in most categories,,
which in anticipation of future loan growth, were not replaced during the
period. In 2004, CCBG will closely monitor liquidity levels to determine if CCBG
should purchase additional investments.
In 2003,
average taxable investments decreased $11.3 million, or 8.3%, while tax-exempt
investments decreased $7.5 million, or 10.9%. Although the Tax Reform Act of
1986 significantly reduced the tax benefits associated with tax-exempt
securities, management will continue to purchase "bank qualified" municipal
issues when it considers the yield to be attractive and CCBG can do so without
adversely impacting its tax position. As of December 31, 2003, CCBG may purchase
additional tax-exempt securities without adverse tax consequences.
The
investment portfolio is a significant component of CCBG's operations and, as
such, it functions as a key element of liquidity and asset/liability management.
As of December 31, 2003, all securities are classified as available-for-sale.
Classifying securities as available-for-sale offers management full flexibility
in managing its liquidity and interest rate sensitivity without adversely
impacting its regulatory capital levels. 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,
2003, shareowners' equity included a net unrealized gain of $1.4 million,
compared to a gain of $3.1 million at December 31, 2002. It is neither
management's intent nor practice to participate in the trading of investment
securities for the purpose of recognizing gains and therefore CCBG does not
maintain a trading portfolio.
The
average maturity of the total portfolio at December 31, 2003 and 2002, was 0.90
and 1.32 years, respectively. See Table 10 for a breakdown of maturities by
portfolio.
The
weighted average taxable equivalent yield of the investment portfolio at
December 31, 2003 was 2.69%, versus 4.98% in 2002. The quality of the municipal
portfolio at such date is depicted on page 119. There were no investments in
obligations, other than U.S. Governments, of any one state, municipality,
political subdivision or any other issuer that exceeded 10% of CCBG's
shareowners' equity at December 31, 2003.
Table 10
and Note 3 in the Notes to Consolidated Financial Statements for the year ended
December 31, 2003 included in this Proxy Statement/Prospectus in Section XII,
beginning on page 229 present a detailed analysis of CCBG's investment
securities as to type, maturity and yield.
Table
10
Maturity
Distribution of Investment Securities
Weighted(1)
Weighted(1)
Amortized
Market Average Amortized Market Average
Cost Value
Yield Cost Value Yield
|
|
As of December 31, |
|
|
|
2003 |
|
2002 |
|
2001 |
|
(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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in 1 year or less |
|
$ |
82,654 |
|
$ |
82,749 |
|
|
1.26 |
% |
$ |
27,037 |
|
$ |
27,651 |
|
|
4.57 |
% |
$ |
15,307 |
|
$ |
15,582 |
|
|
5.24 |
% |
Due
over 1 year through 5 years |
|
|
22,706 |
|
|
22,848 |
|
|
2.04 |
|
|
34,476 |
|
|
34,751 |
|
|
3.09 |
|
|
25,996 |
|
|
26,797 |
|
|
5.25 |
|
Due
over 5 years through 10 years |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Due
over 10 years |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
TOTAL |
|
|
105,360 |
|
|
105,597 |
|
|
1.43 |
|
|
61,513 |
|
|
62,402 |
|
|
3.74 |
|
|
41,303 |
|
|
42,379 |
|
|
5.25 |
|
STATE
& POLITICAL SUBDIVISIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in 1 year or less |
|
|
19,018 |
|
|
19,205 |
|
|
4.18 |
|
|
5,193 |
|
|
5,251 |
|
|
5.48 |
|
|
9,227 |
|
|
9,312 |
|
|
6.56 |
|
Due
over 1 year through 5 years |
|
|
36,046 |
|
|
37,337 |
|
|
4.47 |
|
|
56,724 |
|
|
59,264 |
|
|
5.96 |
|
|
60,149 |
|
|
61,236 |
|
|
6.00 |
|
Due
over 5 years through 10 years |
|
|
577 |
|
|
610 |
|
|
4.36 |
|
|
928 |
|
|
960 |
|
|
6.41 |
|
|
1,336 |
|
|
1,329 |
|
|
6.32 |
|
Due
over 10 years |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
193 |
|
|
188 |
|
|
6.53 |
|
TOTAL |
|
|
55,641 |
|
|
57,152 |
|
|
4.37 |
|
|
62,845 |
|
|
65,475 |
|
|
5.93 |
|
|
70,905 |
|
|
72,065 |
|
|
6.08 |
|
MORTGAGE-BACKED
SECURITIES(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in 1 year or less |
|
|
356 |
|
|
361 |
|
|
5.12 |
|
|
10,593 |
|
|
10,707 |
|
|
4.66 |
|
|
6,707 |
|
|
6,785 |
|
|
5.29 |
|
Due
over 1 year through 5 years |
|
|
11,167 |
|
|
11,586 |
|
|
5.29 |
|
|
24,048 |
|
|
25,112 |
|
|
5.61 |
|
|
56,803 |
|
|
57,599 |
|
|
5.71 |
|
Due
over 5 years through 10 years |
|
|
95 |
|
|
98 |
|
|
3.26 |
|
|
109 |
|
|
111 |
|
|
4.27 |
|
|
872 |
|
|
864 |
|
|
5.89 |
|
Due
over 10 years |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
TOTAL |
|
|
11,618 |
|
|
12,045 |
|
|
5.27 |
|
|
34,750 |
|
|
35,930 |
|
|
5.31 |
|
|
64,382 |
|
|
65,248 |
|
|
5.67 |
|
OTHER
SECURITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
in 1 year or less |
|
|
1,003 |
|
|
1,016 |
|
|
6.18 |
|
|
8,515 |
|
|
8,693 |
|
|
5.42 |
|
|
22,284 |
|
|
22,646 |
|
|
5.60 |
|
Due
over 1 year through 5 years |
|
|
— |
|
|
— |
|
|
— |
|
|
1,016 |
|
|
1,065 |
|
|
6.18 |
|
|
9,619 |
|
|
9,880 |
|
|
5.53 |
|
Due
over 5 years through 10 years |
|
|
2 |
|
|
2 |
|
|
— |
|
|
127 |
|
|
127 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Due
over 10 years(3) |
|
|
5,922 |
|
|
5,922 |
|
|
3.89 |
|
|
6,623 |
|
|
6,623 |
|
|
5.12 |
|
|
6,871 |
|
|
6,855 |
|
|
6.11 |
|
TOTAL |
|
|
6,927 |
|
|
6,940 |
|
|
4.22 |
|
|
16,281 |
|
|
16,508 |
|
|
5.34 |
|
|
38,774 |
|
|
39,381 |
|
|
5.67 |
|
TOTAL
INVESTMENT SECURITIES |
|
$ |
179,546 |
|
$ |
181,734 |
|
|
2.69 |
% |
$ |
175,389 |
|
$ |
180,315 |
|
|
4.98 |
% |
$ |
215,364 |
|
$ |
219,073 |
|
|
5.72 |
% |
(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.
AVERAGE MATURITY
(In
Years) |
|
|
|
|
|
AS OF DECEMBER 31, |
|
|
|
2003 |
|
2002 |
|
2001 |
|
U.S.
Governments |
|
|
.73 |
|
|
.75 |
|
|
1.16 |
|
State
and Political Subdivisions |
|
|
1.23 |
|
|
1.99 |
|
|
2.69 |
|
Mortgage-Backed
Securities |
|
|
1.56 |
|
|
1.60 |
|
|
2.41 |
|
Other
Securities |
|
|
.30 |
|
|
.75 |
|
|
.89 |
|
TOTAL |
|
|
.90 |
|
|
1.32 |
|
|
2.02 |
|
MUNICIPAL
PORTFOLIO QUALITY
(Dollars
in Thousands)
Moody's Rating |
|
Amortized Cost |
|
Percentage |
|
|
|
|
|
|
|
|
|
AAA |
|
$ |
36,854 |
|
|
66.2 |
% |
AA-1 |
|
|
2,977 |
|
|
5.4 |
|
AA-2 |
|
|
1,057 |
|
|
1.9 |
|
AA-3 |
|
|
1,881 |
|
|
3.4 |
|
AA |
|
|
80 |
|
|
.1 |
|
A-1 |
|
|
374 |
|
|
.7 |
|
A-2 |
|
|
734 |
|
|
1.3 |
|
Not
Rated(1) |
|
|
11,684 |
|
|
21.0 |
|
Total |
|
$ |
55,641 |
|
|
100.0 |
% |
(1)
All of the securities not rated by Moody's are rated "A" or higher by
S&P.
Deposits
and Funds Purchased
Average
total deposits of $1.4 billion in 2003 increased $6.8 million, or 0.5% from the
prior year. Growth of nonmaturity deposits created a favorable shift in deposit
mix and a positive impact on Capital City Bank’s cost of funds. This was
partially offset by the continued decline in certificates of deposit. Average
certificates of deposit as a percent of average total deposits have declined
from 34.7% in 2002 to 30.2% in 2003. This was primarily a result of increased
competition and the relative low level of interest rates.
Table 2
provides an analysis of CCBG's average deposits, by category, and average rates
paid thereon for each of the last three years. Table 11 reflects the shift in
CCBG's deposit mix over the last three years 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 advances, and other
borrowings, increased $28.7 million, or 39.5%. The increase is primarily
attributable to the reclassification of two Federal Home Loan Bank advances
totaling $40 million from long-term debt. See Note 9 in the Notes to
Consolidated Financial Statements for the year ended December 31, 2003, on page
247.
Table
11
Sources
Of Deposit Growth
(Average
Balances - Dollars in Thousands)
|
|
|
|
|
|
Components of Total
Deposits |
|
|
|
2002 to 2003 Change |
|
Percentage of
Total Change |
|
2003 |
|
2002 |
|
2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Bearing Deposits |
|
$ |
49,111 |
|
|
721.2 |
% |
|
28.6 |
% |
|
25.3 |
% |
|
21.2 |
% |
NOW
Accounts |
|
|
22,286 |
|
|
327.3 |
|
|
18.4 |
|
|
17.0 |
|
|
14.9 |
|
Money
Market Accounts |
|
|
(8,678 |
) |
|
(127.4 |
) |
|
15.1 |
|
|
15.7 |
|
|
14.5 |
|
Savings |
|
|
4,870 |
|
|
71.5 |
|
|
7.7 |
|
|
7.4 |
|
|
7.5 |
|
Time
Deposits |
|
|
(60,780 |
) |
|
(892.6 |
) |
|
30.2 |
|
|
34.7 |
|
|
41.9 |
|
Total
Deposits |
|
$ |
6,809 |
|
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
Table
12
Maturity
Distribution of Certificates of Deposit $100,000 or
Over
|
|
|
December 31, 2003 |
|
(Dollars in Thousands) |
|
|
Time Certificates of Deposit |
|
|
Percent |
|
|
|
|
|
|
|
|
|
Three
months or less |
|
$ |
44,033 |
|
|
41.1 |
% |
Over
three through six months |
|
|
20,318 |
|
|
19.0 |
|
Over
six through twelve months |
|
|
20,220 |
|
|
18.9 |
|
Over
twelve months |
|
|
22,610 |
|
|
21.0 |
|
Total |
|
$ |
107,181 |
|
|
100.0 |
% |
Liquidity
And Capital Resources
Liquidity
Liquidity
for a banking institution is the availability of funds to meet increased loan
demand and/or excessive deposit withdrawals. Management monitors CCBG's
financial position in an effort to ensure CCBG has ready access to sufficient
liquid funds to meet normal transaction requirements, can take advantage of
investment opportunities and cover unforeseen liquidity demands. In addition to
core deposit growth, sources of funds available to meet liquidity demands
include cash received through ordinary business activities (e.g., collection of
interest and fees), federal funds sold, loan and investment maturities, bank
lines of credit for CCBG, approved lines for the purchase of federal funds by
Capital City Bank and Federal Home Loan Bank advances.
CCBG
ended 2003 with approximately $125 million in liquidity, a decline of
approximately $45 million from the previous year-end. The decline was primarily
the result of loan growth. CCBG intends to use approximately $26.1 million of
cash to acquire Quincy State Bank, which may decrease liquidity in the first
quarter of 2004. Management expects to use a mixture of debt and stock to fund
future acquisition opportunities.
As of
December 31, 2003, CCBG had a $25.0 million credit facility under which all the
funds were currently available. The facility offers CCBG an unsecured, revolving
line of credit that matures in May 2004 at which time renewal terms will be
negotiated. Upon expiration of the revolving line of credit, the outstanding
balance may be converted to a term loan and repaid over a period of seven years.
The term loan is to be secured by stock of the subsidiary bank equal to at least
125% of the principal balance of the term loan. CCBG, at its option, may select
from various loan rates including Prime, LIBOR or the lenders’ Cost of Funds
rate ("COF"), plus or
minus
increments thereof. The LIBOR or COF rates may be fixed for a period of up to
six months. CCBG also has the option to select fixed rates for periods of one
through five years. As of December 31, 2003, CCBG did not have any debt
outstanding on the line of credit.
CCBG's
credit facility imposes certain limitations on the level of CCBG's equity
capital, and federal and state regulatory agencies have established regulations
which govern the payment of dividends to a bank holding company by its bank
subsidiaries. As of year-end 2003, CCBG was in compliance with all of these
contractual and/or regulatory requirements. A further discussion of CCBG’s
credit facility can be found in Note 10 in the Notes to Consolidated Financial
Statements.
At
December 31, 2003, CCBG had $46.5 million in long-term debt outstanding to the
Federal Home Loan Bank of Atlanta. The debt consists of 29 loans. The interest
rates are fixed and the weighted average rate at December 31, 2003 was 4.27%.
Required annual principal reductions approximate $1.5 million, with the
remaining balances due at maturity ranging from 2005 to 2023. During 2003, CCBG
reclassified $40 million, consisting of two advances from the Federal Home Loan
Bank of Atlanta, from long-term to short-term debt. Additions to long-term debt
consists of approximately $16 million used to match-fund longer-term, fixed rate
loan products, which management elected not to fund internally due to
asset/liability management considerations. The debt is secured by 1-4 family
residential mortgage loans. See Note 10 in the Notes to Consolidated Financial
Statements for the year ended December 31, 2003 on page 247 for additional
information as to CCBG's long-term debt.
It is
anticipated that capital expenditures will approximate $5 million over the next
twelve months. These capital expenditures are expected to consist primarily of
several new offices in existing markets, office equipment and furniture, and
technology purchases. Management believes these capital expenditures can be
funded internally without impairing CCBG's ability to meet its on-going
obligations.
Table
13
Table 13
sets forth certain information about contractual cash obligations at December
31, 2003.
|
|
Payments Due By Period |
|
(Dollars
in Thousands) |
|
1 Year or Less |
|
1 - 3 Years |
|
4 - 5 Years |
|
After 5
Years |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Debt Obligations |
|
$ |
1,878 |
|
$ |
19,790 |
|
$ |
5,942 |
|
$ |
18,865 |
|
$ |
46,475 |
|
Operating
Lease Obligations |
|
|
1,107 |
|
|
2,757 |
|
|
1,937 |
|
|
1,009 |
|
|
6,810 |
|
Total
Contractual Cash Obligations |
|
$ |
2,985 |
|
$ |
22,547 |
|
$ |
7,879 |
|
$ |
19,874 |
|
$ |
53,285 |
|
Capital
CCBG
continues to maintain a strong capital position. The ratio of shareowners'
equity to total assets at year-end was 10.98%, 10.22% and 9.43%, in 2003, 2002
and 2001, respectively.
CCBG is
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 Board 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 1 capital. As of December 31, 2003, CCBG exceeded these
capital guidelines with a total risk-based capital ratio of 13.79% and a Tier 1
ratio of 12.88%, compared to 13.00% and 12.03%, respectively, in
2002.
In
addition, a tangible leverage ratio is now being used in connection with the
risk-based capital standards and is defined as Tier 1 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. An additional 1% to 2% may be required for other companies,
depending upon their regulatory ratings and expansion plans. On December 31,
2003, CCBG had a leverage ratio of 9.51% compared to 8.46% in 2002. See Note 14
in the Notes to Consolidated Financial Statements for the year ended December
31, 2003 on page 253 for additional information as to CCBG's capital
adequacy.
Shareowners'
equity as of December 31, for each of the last three years is presented
below:
Shareowners' Equity
(Dollars
in Thousands) |
|
2003 |
|
2002 |
|
2001 |
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
$ |
132 |
|
$ |
132 |
|
$ |
132 |
|
Additional
Paid-in Capital |
|
|
16,157 |
|
|
14,691 |
|
|
17,152 |
|
Retained
Earnings |
|
|
185,134 |
|
|
168,587 |
|
|
152,149 |
|
Subtotal |
|
|
201,423 |
|
|
183,410 |
|
|
169,433 |
|
Accumulated
Other Comprehensive |
|
|
|
|
|
|
|
|
|
|
Income,
Net of Tax |
|
|
1,386 |
|
|
3,121 |
|
|
2,350 |
|
Total
Shareowners' Equity |
|
$ |
202,809 |
|
$ |
186,531 |
|
$ |
171,783 |
|
At
December 31, 2003, CCBG's common stock had a book value of $15.27 per diluted
share compared to $14.08 in 2002. Beginning in 1994, book value has been
impacted by the net unrealized gains and losses on investment securities
available-for-sale. At December 31, 2003, the net unrealized gain was $1.4
million compared to a net unrealized gain in 2002 of $3.1 million. The decrease
in unrealized gain is a result of changes in the portfolio due to securities
which have matured or been called and a slight increase in interest
rates.
On March
30, 2000, CCBG’s Board of Directors authorized the repurchase of up to 625,000
shares of its outstanding common stock. The purchases are made in the open
market or in privately negotiated transactions. CCBG acquired 155,775 shares
during 2002 and 267,500 shares during 2001. On January 24, 2002, CCBG’s Board of
Directors authorized the repurchase of an additional 312,500 shares of its
outstanding common stock. From March 30, 2000 through February 27, 2004, CCBG
repurchased 572,707 shares at an average purchase price of $19.18 per
share.
CCBG
offers an Associate Incentive Plan under which certain associates are eligible
to earn shares of CCBG stock based upon achieving established performance goals.
In 2003, CCBG issued 10,596 shares, valued at approximately $332,000 under this
plan.
CCBG also
offers stock purchase plans, whereby employees and directors may purchase shares
at a 10% discount. In 2003, 30,095 shares, valued at approximately $904,000,
were issued under these plans.
Dividends
Adequate
capital and financial strength is paramount to the stability of CCBG and its
subsidiary bank. Cash dividends declared and paid should not place unnecessary
strain on CCBG's capital levels. When determining the level of dividends the
following factors are considered:
· |
Compliance
with state and federal laws and
regulations; |
· |
CCBG's
capital position and its ability to meet its financial
obligations; |
· |
Projected
earnings and asset levels; and |
· |
The
ability of Capital City Bank and CCBG to fund
dividends. |
Although
a consistent dividend payment is believed to be favorably viewed by the
financial markets and shareowners, the Board of Directors will declare dividends
only if CCBG is considered to have adequate capital. Future capital requirements
and corporate plans are considered when the Board considers a dividend
payment.
Dividends
declared and paid totaled $.656 per share in 2003. During the second quarter of
2003 CCBG declared a dividend of $.170 per share, an increase of 25.0% from
$.136 per share paid in the first quarter. The dividend was raised 6.0% in the
fourth quarter of 2003 from $.170 per share to $.180 per share. CCBG declared
dividends of $.502 per share in 2002 and $.476 per share in 2001. The dividend
payout ratio was 34.51%, 28.87% and 37.48% for 2003, 2002 and 2001,
respectively. Total cash dividends declared per share in 2003 represented a
30.7% increase over 2002. All share and per share data has been adjusted to
reflect the five-for-four stock dividend paid on June 13, 2003.
Legal
Developments
Prior to
2002, Capital City Bank maintained relationships with a small number of
Independent Service Organizations ("ISO"s) in connection with its card
processing operations. Certain merchant clients of one ISO have alleged they are
entitled to receive financial reserves placed with the ISO. Capital City Bank is
currently named as a co-defendant in two lawsuits brought against the ISO by
merchants. Management does not believe that the ultimate resolution of these
lawsuits will have a material impact on CCBG’s financial position or results of
operations. Capital City Bank no longer maintains merchant service relationships
with ISOs.
Off-Balance
Sheet Arrangements
CCBG does
not currently engage in the use of derivative instruments to hedge interest rate
risks. However, CCBG is a party to financial instruments with off-balance sheet
risks in the normal course of business to meet the financing needs of its
customers.
At
December 31, 2003, CCBG had $290.3 million in commitments to extend credit and
$6.3 million in standby letters of credit. Commitments to extend credit are
agreements to lend to a customer 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. Standby letters of credit
are conditional commitments issued by CCBG to guarantee the performance of a
customer to a third party. CCBG uses the same credit policies in establishing
commitments and issuing letters of credit as it does 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 its ability to meet on-going obligations. In the event these
commitments require funding in excess of historical levels, management believes
current liquidity, available lines of credit from the Federal Home Loan Bank,
investment security maturities and CCBG's $25.0 million credit facility provide
a sufficient source of funds to meet these commitments.
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 CCBG to make
various estimates and assumptions (see Note 1 in the Notes to Consolidated
Financial Statements for the year ended December 31, 2003, included in this
Proxy Statement/Prospectus in Section XII, beginning on page 236). CCBG believes
that, of its significant accounting policies, the following may involve a higher
degree of judgment and complexity.
Allowance
for Loan Losses: The
allowance for loan losses is established through a charge to the provision for
loan losses. Provisions are made to reserve for estimated losses in loan
balances. The allowance for loan losses is a significant estimate and is
evaluated quarterly by CCBG for adequacy. The use of different estimates or
assumptions could produce a different required allowance, and thereby a larger
or smaller provision recognized as expense in any given reporting period. A
further discussion of the allowance for loan losses can be found in the section
entitled "Allowance for Loan Losses" and Note 1 in the Notes to Consolidated
Financial Statements for the year ended December 31, 2003, included in this
Proxy Statement/Prospectus in Section XII, beginning on page 236.
Intangible
Assets:
Intangible assets consist primarily of goodwill and core deposit assets 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. CCBG performs an impairment review on an annual basis
to determine if there has been impairment of its goodwill. CCBG has determined
that no impairment existed at December 31, 2003. Impairment testing requires
management to make significant judgments and estimates relating to the fair
value of its identified reporting units. Significant changes to these estimates
may have a material impact on CCBG's reported results.
Core
deposit assets represent the premium CCBG paid for core deposits. Core deposit
intangibles are amortized on the straight-line method over various periods
ranging from 7-10 years, with the majority being amortized over approximately 10
years. Generally, core deposits refer to nonpublic, nonmaturing deposits
including noninterest-bearing deposits, NOW, money market and savings. CCBG
makes certain estimates relating to the useful life of these assets, and rate of
run-off based on the nature of the specific assets and the customer 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 reported earnings.
Pension
Assumptions: CCBG has
a trusteed defined benefit pension plan for the benefit of substantially all
employees of CCBG and its subsidiary. CCBG's 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 Income 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 Balance Sheets reflect a prepaid
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 anticipated Retirement
Plan cash flows for a 30-year period to long-term corporate Aa-rated bonds 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 2003 was 6.75%. The estimated impact to 2003 pension
expense of a 25 basis point increase or decrease in the discount rate would have
been a decrease of approximately $175,000 and an increase of approximately
$185,000, respectively. The discount rate to be used in 2004 will be 6.25%.
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 in 2003 was 8.25%. The estimated impact to pension expense
of a 25 basis point increase or decrease in the rate of return would have been
an approximate $66,000 decrease or increase, respectively. The rate of return on
plan assets for 2004 will be 8.0%.
The
assumed rate of annual compensation increases (5.50% in 2003) is based on
expected trends in salaries and the employee base. This assumption is not
expected to change materially in 2004.
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 for the year ended December 31, 2003, included in this Proxy
Statement/Prospectus in Section XII on page 250.
Accounting
Pronouncements
In
December 2003, the FASB issued Interpretation No. 46 ("FIN46") (revised December
2003 ("FIN46R")), "Consolidation of Variable Interest Entities," which addresses
how a business enterprise should evaluate whether it has a controlling financial
interest in an entity through means other than voting rights and accordingly
should consolidate the entity. FIN46R replaces FIN46, which was issued in
January 2003. FIN46R applies immediately to a variable interest entity created
after January 31, 2003 and as of the first interim period ending after March 15,
2004 to
those variable interest entities created before February 1, 2003 and not already
consolidated under FIN46 in previously issued financial statements. CCBG does
not hold any interest in variable interest entities that would require
accounting treatment prescribed by this pronouncement.
In May
2003, the FASB issued SFAS No. 150 ("SFAS 150"), "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
150 modifies the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity. The new statement
requires that those instruments be classified as liabilities in statements of
financial position. SFAS 150 is effective for all financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003. CCBG does not
currently maintain any financial instruments that would require the accounting
treatment prescribed by this pronouncement.
In
November 2002, the FASB issued Interpretation No. 45 ("FIN45"), "Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," which addresses the disclosure to be made
by a guarantor in its interim and annual financial statements about its
obligations under guarantees. The Interpretation also requires the recognition
of a liability by a guarantor at the inception of certain guarantees.
FIN45
requires the guarantor to recognize a liability for the non-contingent component
of the guarantee; this is the obligation to stand ready to perform in the event
that specified triggering events or conditions occur. The initial measurement of
this liability is the fair value of the guarantee at inception. The recognition
of the liability is required even it is not probable that payments will be
required under the guarantee or if the guarantee was issued with a premium
payment or as part of a transaction with multiple elements. CCBG has adopted the
disclosure requirements of FIN45 and will apply the recognition and measurement
provisions for all guarantees entered into or modified after December 31, 2002.
To date, CCBG has not entered into or modified any guarantees pursuant to the
provisions of FIN45.
In
October 2002, the FASB issued SFAS No. 147, "Accounting for Certain Acquisitions
of Banking or Thrift Institutions" ("SFAS 147"). SFAS 147 removes financial
institutions (with the exception of combinations of mutual enterprises) from the
scope of both SFAS No. 72 ("SFAS 72"), "Accounting for Certain Acquisitions of
Banking or Thrift Institutions" and FASB Interpretation No. 9, applying APB
Opinions No. 16 and 17, "When a Savings and Loan Association or a Similar
Institution is Acquired in a Business Combination Accounted for by the Purchase
Method" and requires that those transactions be accounted for in accordance with
SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." As a result, the requirement under SFAS 72 to recognize (and
subsequently amortize) any excess of the fair value of liabilities assumed over
the fair value of tangible and identifiable intangible assets acquired as an
unidentifiable intangible asset no longer applies to acquisitions within the
scope of SFAS 147. In addition, SFAS 147 amends SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," to include in its scope
long-term customer-relationship intangible assets of financial institutions such
as depositor- and borrower-relationship intangible assets and credit cardholder
intangible assets. The adoption of SFAS 147 has not had a material impact on the
reported results of operations of CCBG.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2004
Management’s
Discussion and Analysis of Financial Condition
Management’s
discussion and analysis ("MD&A") provides supplemental information, which
sets forth the major factors that have affected CCBG's financial condition and
results of operations and should be read in conjunction with the Consolidated
Financial Statements and related notes. The MD&A is divided into subsections
entitled "Results of Operations," "Financial Condition," "Liquidity and Capital
Resources," "Legal Developments," and "Accounting Policies." Information therein
should facilitate a better understanding of the major factors and trends that
affect CCBG's earnings performance and financial condition, and how CCBG's
performance during 2004 compares with prior years. Throughout this section, CCBG
and its subsidiary, collectively, are referred to as "CCBG".
The
period-to-date averages used in this report are based on daily balances for each
respective period. In certain circumstances, comparing average balances for the
comparable quarters of consecutive years may be more meaningful than simply
analyzing year-to-date averages. Therefore, where appropriate, quarterly
averages have been presented for analysis and have been noted as such. See Table
I for average balances and interest rates presented on a quarterly
basis.
This
Report and other Company communications and statements may contain
"forward-looking statements." 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" and similar expressions are intended to
identify forward-looking statements. The following factors, among others, could
cause our financial performance to differ materially from what is contemplated
in those forward-looking statements:
· |
The
strength of the United States economy in general and the strength of the
local economies in which we conduct operations may be different than
expected resulting in, among other things, a deterioration in credit
quality or a reduced demand for credit, including the resultant effect on
our loan portfolio and allowance for loan losses;
|
· |
Worldwide
political and social unrest, including acts of war and
terrorism; |
· |
The
effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal
Reserve System; |
· |
Inflation,
interest rate, market and monetary fluctuations;
|
· |
Adverse
conditions in the stock market and other capital markets and the impact of
those conditions on our capital markets and capital management activities,
including our investment and wealth management advisory businesses and
brokerage activities; |
· |
Changes
in U.S. foreign or military policy; |
· |
The
timely development of competitive new products and services by us and the
acceptance of those products and services by new and existing customers;
|
· |
The
willingness of customers to accept third-party products marketed by us;
|
· |
The
willingness of customers to substitute competitors' products and services
for our products and services and vice
versa; |
· |
The
impact of changes in financial services laws and regulations (including
laws concerning taxes, banking, securities and insurance);
|
· |
Changes
in consumer spending and saving habits; |
· |
The
effect of corporate restructuring, acquisitions or dispositions, including
the actual restructuring and other related charges and the failure to
achieve the expected gains, revenue growth or expense savings from such
corporate restructuring, acquisitions or dispositions;
|
· |
The
growth and profitability of our noninterest or fee income being less than
expected; |
· |
Unanticipated
regulatory or judicial proceedings; |
· |
The
impact of changes in accounting policies by the Securities and Exchange
Commission; |
· |
Adverse
changes in the financial performance and/or condition of our borrowers,
which could impact the repayment of those borrowers' outstanding loans;
and |
· |
Our
success at managing the risks involved in the foregoing.
|
We
caution that the foregoing list of important factors is not exhaustive. Also, we
do not undertake to update any forward-looking statement, whether written or
oral, that may be made from time to time by us or on our behalf.
CCBG is
headquartered in Tallahassee, Florida and as of September 30, 2004 had 57
banking offices, six residential lending offices, 73 ATMs and 11 Bank'N Shop
locations in Florida, Georgia and Alabama.
On
October 15, 2004, CCBG completed its acquisition of Farmers and Merchants Bank
in Dublin, Georgia, a $395 million asset institution with three offices in
Laurens County. CCBG issued 17.08 shares and $666.50 in cash for each of the
50,000 shares of Farmers and Merchants Bank, resulting in the issuance of
854,000 shares of Company common stock and the payment of $33.3 million in cash
for a total purchase price of approximately $66.7 million.
Results
of Operations
Net
Income
Earnings
for the three and nine months ended September 30, 2004 were $10.8 million, or
$0.82 per diluted share, and $22.1 million, or $1.67 per diluted share,
respectively. This compares to $6.3 million, or $0.47 per diluted share, and
$19.1 million, or $1.44 per diluted share in 2003. CCBG sold its $22.7 million
credit card portfolio during the third quarter resulting in a one-time after-tax
gain of $4.2 million, or $.32 per diluted share. Core earnings (reported
earnings excluding the gain) for the three and nine months ended September 30,
2004 were $6.6 million, or $.50 per diluted share, and $17.9 million, or $1.35
per diluted share, respectively.
Growth in
core earnings for the third quarter of $310,000, or 3.1%, was primarily
attributable to a $1.3 million, or 6.4% increase in net interest income and a
$621,000, or 67.4% decrease in the loan loss provision offset by a $1.4 million,
or 7.2% increase in operating expenses, and $211,000, or 6.0% increase in income
taxes. Core earnings for the nine month period declined by $1.2 million, or 6.3%
primarily attributable to higher operating expenses of $5.2 million, or 8.8%,
that were partially offset by a $1.5 million, or 2.5% increase in net interest
income, a $745,000, or 28.8% decrease in the loan loss provision, a $451,000, or
1.4% increase in noninterest income, and lower taxes of $1.3 million, or 12.1%.
A condensed earnings summary is presented below.
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
(Dollars
in Thousands) |
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and Dividend Income |
|
$ |
24,660 |
|
$ |
23,484 |
|
$ |
71,595 |
|
$ |
71,807 |
|
Taxable-Equivalent
Adjustment(1) |
|
|
276 |
|
|
354 |
|
|
884 |
|
|
1,079 |
|
Interest
Income (FTE) |
|
|
24,936 |
|
|
23,838 |
|
|
72,479 |
|
|
72,886 |
|
Interest
Expense |
|
|
3,408 |
|
|
3,506 |
|
|
9,807 |
|
|
11,500 |
|
Net
Interest Income (FTE) |
|
|
21,528 |
|
|
20,332 |
|
|
62,672 |
|
|
61,386 |
|
Provision
for Loan Losses |
|
|
300 |
|
|
921 |
|
|
1,841 |
|
|
2,586 |
|
Taxable-Equivalent
Adjustment |
|
|
276 |
|
|
354 |
|
|
884 |
|
|
1,079 |
|
Net
Interest Income After Provision for Loan
Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Income |
|
|
17,721 |
|
|
10,952 |
|
|
38,633 |
|
|
31,325 |
|
Merger/Conversion
Expense |
|
|
68 |
|
|
— |
|
|
114 |
|
|
— |
|
Noninterest
Expense |
|
|
21,565 |
|
|
20,184 |
|
|
64,195 |
|
|
59,127 |
|
Income
Before Income Taxes |
|
|
17,040 |
|
|
9,825 |
|
|
34,271 |
|
|
29,919 |
|
Income
Taxes |
|
|
6,221 |
|
|
3,529 |
|
|
12,162 |
|
|
10,822 |
|
Net
Income |
|
$ |
10,819 |
|
$ |
6,296 |
|
$ |
22,109 |
|
$ |
19,097 |
|
Percent
Change(2) |
|
|
71.82 |
% |
|
8.53 |
% |
|
15.77 |
% |
|
16.73 |
% |
Return
on Average Assets(3) |
|
|
2.22 |
% |
|
1.38 |
% |
|
1.55 |
% |
|
1.42 |
% |
Return
on Average Equity(3) |
|
|
19.81 |
% |
|
12.55 |
% |
|
13.98 |
% |
|
13.11 |
% |
(1) Computed
using a federal statutory tax rate of 35%
(2) From
prior comparable period
(3)
Annualized
Net
Interest Income
Net
interest income represents CCBG's 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. Third quarter of 2004 taxable-equivalent net
interest income increased $1.2 million, or 5.9%, over the comparable quarter in
2003. For the nine month period, taxable-equivalent net interest income
increased $1.3 million, or 2.1%, over the comparable period in 2003. The
favorable impact of lower funding costs, an improved earning asset mix and the
first quarter acquisition of Quincy State Bank was partially offset by declining
asset yields attributable to the low interest rate environment. Table I on page
141 provides a comparative analysis of CCBG's average balances and interest
rates.
For the
three month period ended September 30, 2004, taxable-equivalent interest income
increased $1.1 million, or 4.6%, over the comparable period in 2003. For the
nine month period ended September 30, 2004, taxable-equivalent interest income
decreased $407,000, or .56%, over the comparable period in 2003. For the third
quarter, growth in earning assets resulting from strong loan demand and the
acquisition of Quincy State Bank drove the increase in interest income. For the
nine month period, lower yields for new loan production and the repricing of
existing earning assets drove the decline in interest income. The Federal
Reserve increased interest rates slightly during the second quarter of 2004
which should begin to have a favorable impact on new loan production. Repricing
of existing assets (at current rate levels) will continue to put pressure on
earning asset yields.
Interest
expense for the three and nine month periods ended September 30, 2004 declined
$98,000, or 2.8%, and $1.7 million, or 14.7%, respectively, from the comparable
periods in 2003. The
favorable variances were primarily attributable to lower rates and were further
enhanced by a favorable shift in mix (i.e. increase in lower cost noninterest
bearing non-maturity deposits and a decrease in higher cost certificates of
deposit). The year-to-date average rate paid on interest bearing liabilities in
2004 declined 21 basis points from 2003, to a level of 1.09%.
CCBG's
interest rate spread (defined as the average federal taxable-equivalent yield on
earning assets less the average rate paid on interest bearing liabilities) was
4.60% and 4.61% for the three and nine months ended September 30, 2004,
respectively, compared to 4.61% and 4.71% for the comparable periods in
2003.
CCBG's
net interest margin percentage (defined as taxable-equivalent net interest
income divided by average earning assets) was 4.94% and 4.93% for the three and
nine months ended September 30, 2004, respectively, compared to 4.94% and 5.06%
for the comparable periods in 2003. The reduction in the spread and margin for
the nine month period reflects lower yields. Capital City Bank is
asset-sensitive, which should result in improvement in the net interest margin
as rates rise. However, management expects the improvement to be gradual, and
could be further impacted by increasing competition for deposits.
Provision
for Loan Losses
The
provision for loan losses was $300,000 and $1.8 million, respectively, for the
three and nine month periods ended September 30, 2004, compared to $921,000 and
$2.6 million for the same periods in 2003. The provision decrease for both
periods was due primarily to lower projected credit card charge-offs due to the
sale of the portfolio in August.
Net
charge-offs totaled $829,000, or .22% of average loans for the quarter compared
to $931,000, or .28% for the third quarter of 2003. The primary reason for the
decrease in net charge-offs for the third quarter was the higher level of
consumer loan recoveries. Net charge-offs totaled $2.5 million, or .22% of
average
loans,
for the first nine months of 2004, compared to $2.7 million, or .27%, for the
comparable period in 2003.
Charge-off
activity for the respective periods is set forth below:
|
|
|
Three Months Ended September
30, |
|
|
Nine Months Ended September
30, |
|
|
|
|
2004 |
|
|
2003 |
|
|
2004 |
|
|
2003 |
|
CHARGE-OFFS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
Financial and Agricultural |
|
$ |
187 |
|
$ |
61 |
|
$ |
640 |
|
$ |
379 |
|
Real
Estate - Construction |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Real
Estate - Commercial Mortgage |
|
|
— |
|
|
91 |
|
|
39 |
|
|
91 |
|
Real
Estate - Residential |
|
|
19 |
|
|
119 |
|
|
113 |
|
|
172 |
|
Consumer |
|
|
998 |
|
|
937 |
|
|
2,930 |
|
|
2,739 |
|
Total
Charge-offs |
|
|
1,204
|
|
|
1,208 |
|
|
3,722 |
|
|
3,381 |
|
RECOVERIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial,
Financial and Agricultural |
|
|
10 |
|
|
73 |
|
|
47 |
|
|
129 |
|
Real
Estate - Construction |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Real
Estate - Commercial Mortgage |
|
|
14 |
|
|
— |
|
|
14 |
|
|
— |
|
Real
Estate - Residential |
|
|
1 |
|
|
— |
|
|
176 |
|
|
1 |
|
Consumer |
|
|
350 |
|
|
204 |
|
|
1,030 |
|
|
594 |
|
Total
Recoveries |
|
|
375 |
|
|
277 |
|
|
1,267 |
|
|
724 |
|
Net
Charge-offs |
|
$ |
829 |
|
$ |
931 |
|
$ |
2,455 |
|
$ |
2,657 |
|
Net
Charge-offs (Annualized) as a Percent of Average Loans Outstanding,
Net of Unearned Interest |
|
|
.22 |
% |
|
.28 |
% |
|
.22 |
% |
|
.27 |
% |
Noninterest
Income
Noninterest
income increased $6.8 million, or 61.8%, and $7.3 million, or 23.3%,
respectively, over the comparable three and nine month periods in 2003,
primarily reflecting the $6.9 million one-time gain on the sale of the credit
card portfolio in the third quarter. Noninterest income (excluding the one-time
gain) was flat for the third quarter compared to the same period in 2003, but
increased $451,000, or 1.4% over the nine month period in 2003, primarily
reflecting higher deposit, asset management, and data processing fees, and other
income. These improvements more than offset a $2.5 million reduction in mortgage
banking revenues. Excluding the one-time gain on the sale of the credit card
portfolio, noninterest income represented 33.8% and 34.0% of operating revenue
for the three and nine month periods of 2004 compared to 35.4% and 34.2% for the
same periods in 2003.
Service
charges on deposit accounts increased $364,000, or 8.8%, and $694,000, or 5.7%,
respectively, over the comparable three and nine month periods in 2003. Service
charge revenues in any one period are dependent on the number of accounts,
primarily transaction accounts, and the level of activity subject to service
charges. The increase was attributable to higher NSF/overdraft fees, partially
attributable to a recent change in fee structure and lower NSF/overdraft
charge-offs.
Data
processing revenues of $652,000 and $2.0 million for the three and nine month
periods ended September 30, 2004, respectively, reflect an increase of 12.8% and
13.8% over the comparable periods in 2003. The increase in both periods was
primarily a result of higher processing revenues from existing financial
clients. CCBG currently provides data processing services for six financial
clients and contract processing services for four non-financial clients. During
the first nine
months of
2004 and 2003, financial clients represented approximately 66.2% and 60.6% of
total processing revenues, respectively.
Income
from asset management activities increased $375,000, or 56.8%, and $811,000, or
42.4%, respectively, over the comparable three and nine month periods in 2003.
This increase was due primarily to the acquisition of $208 million in managed
trust accounts from Synovus Trust Company in connection with the Quincy State
Bank acquisition during the first quarter, and further enhanced by growth of new
business in existing markets. At September 30, 2004, assets under management
totaled $611.7 million, representing an increase of $236.9 million, or 63.2%
from the comparable period in 2003.
Mortgage
banking revenues declined $1.3 million, or 61.0%, and $2.5 million, or 49.8%,
respectively, over the comparable three and nine month periods in 2003. This
decline reflects a slow-down in residential lending markets, which began during
the latter part of the fourth quarter of 2003 and has continued through the
current reporting period. This declining trend stabilized in the second quarter
as revenues improved $292,000, or 42.1% over the first quarter. Third quarter
revenues declined $180,000, or 18.3% from the second quarter partially
attributable to the impact of the September hurricanes that slowed insurance
underwriting and loan closings.
Other
income increased $350,000, or 9.9%, and $1.2 million, or 11.0%, respectively,
over the comparable three and nine month periods in 2003. For the nine month
period, CCBG experienced increases in retail brokerage fees of $256,000,
merchant card processing fees of $515,000, miscellaneous recoveries of $265,000,
and gain on sale of other real estate of $185,000.
Noninterest
income as a percent of average assets was 2.72% and 2.33%, respectively, for the
first nine months of 2004 and 2003. The increase was due to the $6.9 million
one-time gain on sale of the credit card portfolio recorded in the third
quarter. Excluding the one-time gain, the ratio for 2004 was 2.23%. The decrease
was primarily attributable to the decline in mortgage banking revenues.
Noninterest
Expense
Noninterest
expense increased $1.5 million, or 7.2%, and $5.2 million, or 8.8%,
respectively, over the comparable three and nine month periods in 2003. Factors
impacting CCBG’s noninterest expense during the first nine months of 2004 are
discussed below.
Compensation
expense increased $415,000, or 3.9%, and $2.1 million, or 6.8% over the
comparable three and nine month periods in 2003. For the nine month period, CCBG
experienced increases in associate salaries of $1.9 million, payroll tax expense
of $134,000, pension plan expense of $325,000, and associate insurance expense
of $225,000. These increases were partially offset by lower expense of $536,000
for other compensation, primarily related to CCBG’s stock incentive plan. The
increases in associate salaries and payroll tax were reflective of normal merit
raises and the late first quarter integration of Quincy State Bank associates.
The higher pension costs were due primarily to a lower discount rate and rate of
return on plan assets used for the 2004 expense projection. The increase in
associate insurance expense was attributable to additional participants and
higher healthcare insurance premiums.
Occupancy
expense, including premises, furniture, fixtures and equipment increased
$365,000, or 10.0%, and $1.2 million, or 12.0%, respectively, over the
comparable three and nine month periods in 2003. For the nine month period, CCBG
experienced increases in depreciation of $333,000, maintenance and repairs of
$224,000,
premises rental of $162,000, utilities of $140,000, property taxes of $60,000,
and other FF&E expense of $272,000 from the comparable period in 2003. The
increase in depreciation, utilities, and property tax expense was primarily
attributable to the addition of three new banking offices in the second half of
2003. Higher maintenance and repairs expense was driven by upgrades and repairs
to existing banking offices and incremental expense incurred with the addition
of three new banking offices in the second half of 2003. The increase in
premises rental expenses was due to a lease renewal. Other FF&E expense
increased primarily due to higher expenses for software license fees associated
with various core processing applications.
Other
noninterest expense increased $669,000, or 11.2%, and $1.9 million, or 10.2%,
respectively, over the comparable three and nine month periods in 2003. For the
nine month period, the increase was primarily attributable to: 1) higher
professional fees of $618,000; 2) higher advertising expense of $584,000; 3)
higher telephone expense of $154,000; 4) higher commission/service fees of
$145,000; 5) higher intangible amortization expense of $242,000; and 6) higher
merger expenses of $114,000. Higher professional fees was due to the increased
cost of CCBG’s external audit and consulting projects, which may vary as to
their magnitude and timing. Advertising expense will fluctuate consistent with
advertising strategies planned throughout the year. The increase in
commission/service fees was attributable to higher interchange service fees
associated with increased merchant card processing volume, and was offset by
higher merchant card processing fees reflected in other income. The increase in
telephone, intangible amortization, and merger expenses were due to the late
first quarter integration of Quincy State Bank.
Annualized
net noninterest expense (noninterest income minus noninterest expense, excluding
intangible amortization and one-time merger expenses) as a percent of average
assets was 1.61% for the first nine months of 2004 compared to 1.88% in 2003.
CCBG's efficiency ratio (noninterest expense, excluding intangible amortization
and one-time merger expense, expressed as a percent of the sum of
taxable-equivalent net interest income plus noninterest income) was 60.73% for
the first nine months of 2004 compared to 61.15% for the comparable period in
2003. Both of the above mentioned metrics were significantly impacted by the
$6.9 million one-time gain on sale of the credit card portfolio recorded in the
third quarter of 2004. Excluding the one-time gain, these metrics adjust to
2.09% and 65.14%, respectively.
Income
Taxes
The
provision for income taxes increased $2.7 million, or 76.3%, during the third
quarter and $1.3 million, or 12.4%, during the first nine months of 2004,
relative to the comparable prior year periods, reflecting higher taxable income.
CCBG's effective tax rate for the first nine months of 2004 was 35.5% versus
36.2% for the comparable period in 2003. The decline in the effective tax rate
was primarily attributable to a modification of CCBG’s tax structure enabling
CCBG to more effectively manage its tax position.
Financial
Condition
Asset and
liability balances as of September 30, 2004 include those of Quincy State Bank,
which was acquired on March 19, 2004.
CCBG's
average assets increased $125.4 million, or 6.9%, to $1.94 billion for the
quarter-ended September 30, 2004 from $1.82 billion in the comparable quarter of
2003. Average earning assets of $1.7 billion increased $100.0 million, or 6.1%,
from the comparable quarter of 2003 driven by a $188.3 million, or 14.1%,
increase in
average
loans. Offsetting the increase in average loans was a decrease in short-term
investments of $90.4 million, or 69.5%. Table I
on page 141 presents average balances for the three and nine month periods
ended September 30, 2004 and 2003.
Average
net overnight funds for the third quarter of 2004 were approximately $10.5
million. This represented a decline of $105.9 million, or 91.0% from the 2003
level of $116.4 million. For a further discussion on liquidity see the section
“Liquidity and Capital Resources.”
The
investment portfolio functions as a key element of liquidity and asset/liability
management. For the quarter ended September 30, 2004, the average investment
portfolio increased $2.1 million, or 1.3%, from the third quarter of 2003. U.S.
Agency security balances increased by $21.2 million from third quarter of 2003
offset by a decrease in mortgage-backed, municipal, and other security balances
of $19.3 million. Management will continue to evaluate the need to purchase
securities for the investment portfolio for the remainder of 2004, taking into
consideration Capital City Bank’s liquidity position and pledging
requirements.
Securities
are recorded at fair value and unrealized gains and losses associated with these
securities are recorded, net of tax, as a separate component of shareowners’
equity. At September 30, 2004, shareowners’ equity included a net unrealized
gain of $452,000 compared to a gain of $1.4 million at December 31, 2003. The
decrease in value reflects the slight increase in interest rates during the
first nine months of 2004.
Average
loans grew $188.3 million, or 14.1%, and $143.7 million, or 10.9%, for the three
and nine months ended September 30, 2004. The increase in average loans was
driven by strong loan production in existing markets, and $85.0 million in loans
acquired in the Quincy State Bank merger late in the first quarter. For the
third quarter, CCBG realized strong gains in all loan categories. For the nine
month period, strong gains were realized in the commercial, real estate
(construction, commercial mortgage, and home equity), and indirect consumer loan
categories. Management expects loan growth to continue into the fourth
quarter.
CCBG's
nonperforming loans (including nonaccruing and restructured loans) were $4.7
million at September 30, 2004, versus $2.3 million at year-end and $6.8 million
for the same period in 2003. The increase in nonaccruing loans over year-end was
due to the addition of one large commercial real estate loan for $2.1 million to
nonaccrual status. Management expects no loss associated with the resolution of
this loan. Other real estate, which includes property acquired either through
foreclosure or by receiving a deed in lieu of foreclosure, was $894,000 at
September 30, 2004, versus $5.0 million at December 31, 2003 and $1.6 million at
September 30, 2003. The $4.1 million decrease in other real estate since
year-end was primarily attributable to the resolution of one large commercial
real estate loan for $3.9 million. The ratio of nonperforming assets as a
percent of loans plus other real estate was .36% at September 30, 2004 compared
to .54% at December 31, 2003 and .63% at September 30, 2003. CCBG expects strong
credit quality to continue into the fourth quarter.
Management
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’ ability and willingness to repay,
and from other risks inherent in the lending process, including collateral risk,
operations risk, concentration risk and economic risk. All related risks of
lending are considered when assessing the adequacy of the loan loss reserve. The
allowance for loan losses is established through a provision charged to expense.
Loans are charged against the allowance when management believes collection of
the
principal
is unlikely. The allowance for loan losses is based on management's judgment of
overall loan quality. This is a significant estimate based on a detailed
analysis of the loan portfolio. The balance can and will change based on changes
in the assessment of the portfolio's overall credit quality.
Management
evaluates the adequacy of the allowance for loan losses on a quarterly basis.
The
allowance for loan losses at September 30, 2004 was $12.3 million, a decrease of
$101,000 from December 31, 2003, and $96,000 from September 30, 2003. At
quarter-end 2004, the allowance represented 0.80% of total loans compared to
0.93% at December 31, 2003, and 0.94% at September 30, 2003. The decline in this
metric reflects the reversal of $800,000 in reserves allocated to credit cards
due to the sale of the portfolio during the third quarter, and a lower loan loss
provision during the third quarter due to lower projected credit card
charge-offs. As a percent of nonperforming loans, the allowance for loan losses
represented 262% at September 30, 2004 versus 530% at December 31, 2003 and 183%
at September 30, 2003. While there can be no assurance that CCBG will not
sustain loan losses in a particular period that are substantial in relation to
the size of the allowance, management’s assessment of the loan portfolio does
not indicate a likelihood of this occurrence. It is management’s opinion that
the allowance at September 30, 2004 is adequate to absorb losses inherent in the
loan portfolio at quarter-end.
Average
total deposits increased $93.3 million, or 6.4%, to $1.55 billion for the
quarter-ended September 30, 2004 from $1.45 billion in the comparable quarter of
2003. The increase was driven by a $70.8 million increase in noninterest bearing
deposits and $27.1 million increase in interest bearing nonmaturity deposits.
These increases were primarily reflective of the deposit accounts acquired from
Quincy State Bank late in the first quarter.
The ratio
of average noninterest bearing deposits to total deposits was 31.9% for the
third quarter of 2004 compared to 29.0% for the third quarter of 2003. For the
same periods, the ratio of average interest bearing liabilities to average
earning assets was 69.7% compared to 71.9%.
Liquidity
and Capital Resources
Liquidity
Liquidity
for a banking institution is the availability of funds to meet increased loan
demand and/or excessive deposit withdrawals. Management monitors CCBG's
financial position in an effort to ensure CCBG has ready access to sufficient
liquid funds to meet normal transaction requirements, take advantage of
investment opportunities and cover unforeseen liquidity demands. In addition to
core deposit growth, sources of funds available to meet liquidity demands
include cash received through ordinary business activities (i.e., collection of
interest and fees), federal funds sold, loan and investment maturities, bank
lines of credit for CCBG, approved lines for the purchase of federal funds by
Capital City Bank and Federal Home Loan Bank advances.
CCBG
maintains a revolving line of credit. As of September 30, 2004, CCBG had no
borrowings under the revolving line of credit. On October 15, 2004, CCBG
obtained an increase in the line of credit to $36.0 million, and subsequently
obtained an advance of $30.0 million to facilitate the payment of cash
consideration for the Farmers and Merchants Bank of Dublin, Georgia closing.
Terms of repayment require interest payable at LIBOR plus 60 basis points.
Effective January 1, 2005, the maximum available line will be reduced from $36.0
million to $25.0 million. The revolving line of credit facility expires October
2007. On November 1, 2004, CCBG
completed
a trust preferred financing in the amount of $30.0 million. The proceeds from
this financing were used to pay off the $30.0 million advance obtained on the
line of credit.
During
the first nine months of 2004, CCBG increased borrowings by $32.7 million due
primarily to the assumption of $3.0 million in FHLB advances from the Quincy
State Bank acquisition, two advances totaling $9.7 million from the FHLB to
match fund loan growth, and one advance for $20.0 million to replace a maturing
advance for the same amount. For the first nine months of the year, Capital City
Bank made scheduled FHLB advance payments totaling $1.3 million and repaid two
advances totaling $40 million. These two advances were repaid in March of 2004
and September of 2004. Both advances originated during the third quarter of
2002, when $75 million was borrowed from the FHLB to fund growth in loan demand
and mitigate the reduction in liquidity caused by a decline in certificates of
deposit.
Capital
CCBG's
equity capital was $219.1 million as of September 30, 2004 compared to $202.8
million as of December 31, 2003. Management continues to monitor its capital
position in relation to its level of assets with the objective of maintaining
its "well-capitalized" designation. The leverage ratio was 9.17% at September
30, 2004 compared to 9.51% at December 31, 2003. Further, CCBG's risk-adjusted
capital ratio of 11.81% at September 30, 2004 exceeds the 8.0% minimum
requirement under risk-based regulatory guidelines.
During
the first nine months of 2004, shareowners’ equity increased $16.3 million.
Growth in equity during the first nine months of the year was positively
impacted by net income of $22.1 million and the issuance of common stock of $2.3
million. Equity was reduced by dividends paid during the first half of $7.2
million, or $.540 per share, and a decrease in the net unrealized gain on
available-for-sale securities of $934,000. At September 30, 2004, CCBG's common
stock had a book value of $16.48 per diluted share compared to $15.27 at
December 31, 2003.
Adequate
capital and financial strength is paramount to the stability of CCBG and its
subsidiary bank. Cash dividends declared and paid should not place unnecessary
strain on CCBG's capital levels. Although a consistent dividend payment is
believed to be viewed favorably by the financial markets and shareowners, the
Board of Directors will declare dividends only if CCBG is considered to have
adequate capital. Future capital requirements and corporate plans are considered
when the Board considers a dividend payment. Dividends declared and paid during
the first nine months of 2004 totaled $.540 per share compared to $.476 per
share for same period in 2003, an increase of 13.5%. The dividend payout ratios
for the third quarter of 2004 and 2003 were 22.1% and 36.9%,
respectively.
State and
federal regulations as well as CCBG's long-term debt agreements place certain
restrictions on the payment of dividends by both CCBG and Capital City Bank. At
September 30, 2004, these regulations and covenants did not impair CCBG's (or
Capital City Bank's) ability to declare and pay dividends or to meet other
existing obligations in the normal course of business.
On March
30, 2000, CCBG’s Board of Directors authorized the repurchase of up to 625,000
shares of its outstanding common stock. On January 24, 2002, CCBG’s Board of
Directors authorized the repurchase of an additional 312,500 shares of its
outstanding common stock. The purchases will be made in the open market or in
privately negotiated transactions. CCBG did not purchase any shares in the first
nine
months of 2004. From March 30, 2000 through September 30, 2004, CCBG repurchased
572,707 shares at an average purchase price of $19.18 per share
Other
Commitments and Contingencies
Financial
Instruments with Off-Balance-Sheet Risk. CCBG
does not currently engage in the use of derivative instruments to hedge interest
rate risks. However, CCBG is a party to financial instruments with off-balance
sheet risks in the normal course of business to meet the financing needs of its
customers.
At
September 30, 2004, CCBG had $244.0 million in commitments to extend credit and
$16.5 million in standby letters of credit. Commitments to extend credit are
agreements to lend to a customer 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. Standby letters of credit are conditional commitments issued by
CCBG to guarantee the performance of a customer to a third party. CCBG uses the
same credit policies in establishing commitments and issuing letters of credit
as it does 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 its ability to meet on-going obligations. In the event these
commitments require funding in excess of historical levels, management believes
current liquidity, available lines of credit from the Federal Home Loan Bank,
investment security maturities and CCBG's credit facility provide a sufficient
source of funds to meet these commitments.
Contractual
Cash Obligations. CCBG
maintains certain debt and operating lease commitments that require cash
payments. The table below details those future cash commitments as of September
30, 2004:
|
|
Payments Due After September 30,
2004 |
|
(Dollars in Thousands) |
|
|
2004 (remaining 3
months) |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
Thereafter |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term
Debt |
|
$ |
24 |
|
$ |
15,000 |
|
$ |
— |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
15,024 |
|
Long-Term
Debt |
|
|
504 |
|
|
3,139 |
|
|
22,342 |
|
|
5,387 |
|
|
4,369 |
|
|
27,189 |
|
|
62,930 |
|
Operating
Leases |
|
|
316 |
|
|
1,092 |
|
|
1,092 |
|
|
1,092 |
|
|
1,055 |
|
|
2,122 |
|
|
6,769 |
|
Total
Contractual Cash Obligations |
|
$ |
844 |
|
$ |
19,231 |
|
$ |
23,434 |
|
$ |
6,479 |
|
$ |
5,424 |
|
$ |
29,311 |
|
$ |
84,723 |
|
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 CCBG to make
various estimates and assumptions (see Note 1 in the Notes to Consolidated
Financial Statements for the quarter ended September 30, 2004 included in this
Proxy Statement/Prospectus in Section XII, beginning on page 236). CCBG believes
that, of its significant accounting policies, the following may involve a higher
degree of judgment and complexity.
Allowance
for Loan Losses: The
allowance for loan losses is established through a charge to the provision for
loan losses. CCBG makes provisions to reserve for estimated losses in loan
balances. The allowance for loan losses is a significant estimate and is
evaluated quarterly by CCBG for adequacy. The use of different estimates or
assumptions could produce a different required allowance, and thereby a larger
or smaller provision recognized as expense in any given reporting period. A
further discussion of the allowance for loan losses can be found in the section
entitled "Allowance for Loan Losses" and Note 1 in the Notes to Consolidated
Financial Statements for the year ended December 31, 2003 included in this Proxy
Statement/Prospectus in Section XII, beginning on page 236.
Intangible
Assets:
Intangible assets primarily consist of goodwill and core deposit assets 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. CCBG performs an impairment review on an annual basis
to determine if there has been impairment of its goodwill. CCBG has determined
that no impairment existed at December 31, 2003. Impairment testing requires
management to make significant judgments and estimates relating to the fair
value of its identified reporting units. Significant changes to these estimates
may have a material impact on CCBG's reported results.
Core
deposit assets represent the premium CCBG paid for core deposits. Core deposit
intangibles are amortized on the straight-line method over various periods
ranging from 7-10 years, with the majority being amortized over approximately 10
years. Generally, core deposits refer to nonpublic, nonmaturing deposits
including noninterest-bearing deposits, NOW, money market and savings. CCBG
makes certain estimates relating to the useful life of these assets, and rate of
run-off based on the nature of the specific assets and the customer 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 reported earnings.
Pension
Assumptions: CCBG has
a defined benefit pension plan for the benefit of substantially all associates
of CCBG and its subsidiary. CCBG's 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 Income 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 Balance Sheets reflect a prepaid 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 anticipated Retirement
Plan cash flows for a 30-year period to long-term corporate Aa-rated bonds 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 for 2004 is 6.25%.
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 2004 is 8.0%.
The
assumed rate of annual compensation increases of 5.5% in 2004 is based on
expected trends in salaries and the associate base. This assumption is not
expected to change materially in 2004.
Detailed
information on components of CCBG’s net benefit cost is provided in Note 8 of
the Notes to Consolidated Financial Statements for the year ended December 31,
2003, included in this Proxy Statement/Prospectus in Section XII on page
246.
New
Accounting Pronouncements
In March
2004, the Financial Accounting Standards Board ratified the consensus reached by
the Emerging Issues Task Force in Issue 03-1, “The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments”
(EITF 03-1). EITF 03-1 provides guidance for determining when an investment is
considered impaired, whether impairment is other-than-temporary, and measurement
of an impairment loss. An investment is considered impaired if the fair value of
the investment is less than its cost. Generally, an impairment is considered
other-than-temporary unless: (a) the investor has the ability and intent to hold
an investment for a reasonable period of time sufficient for a forecasted
recovery of fair value up to (or beyond) the cost of the investment; and (b)
evidence indicating that the cost of the investment is recoverable within a
reasonable period of time outweighs evidence to the contrary. If impairment is
determined to be other-than-temporary, then an impairment loss should be
recognized equal to the difference between the investment’s cost and its fair
value. Certain disclosure requirements of EITF 03-1 were adopted in 2003 and
CCBG
began
presenting the new disclosure requirement in its consolidated financial
statements for the year ended December 31, 2003. The recognition and impairment
provisions were initially effective for other-than-temporary impairment
evaluations in reporting periods beginning after June 15, 2004. However, in
September, 2004, the effective date of these provisions was delayed until the
finalization of the FASB Staff Position (FSP) to provide additional
implementation guidance. Currently, the FASB expects to issue the FSP no later
than December 2004. CCBG is continuing to evaluate the impact of EITF 03-1. The
amount of other-than-temporary impairment CCBG will recognize, if any, will be
dependent on market conditions and management’s intent and ability at the time
of the evaluation to hold investments with unrealized losses until a forecasted
recovery in the fair value up to and beyond the adjusted cost.
TABLE
I
Averages
Balances and Interest Rates
(Taxable
Equivalent Basis - Dollars in Thousands)
|
|
FOR THREE MONTHS ENDED SEPTEMBER
30, |
|
FOR NINE MONTHS ENDED SEPTEMBER
30, |
|
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
|
|
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
Net of Unearned Interest(1) |
|
$ |
1,524,401 |
|
$ |
23,345 |
|
|
6.09 |
% |
$ |
1,336,139 |
|
$ |
21,796 |
|
|
6.47 |
% |
$ |
1,457,826 |
|
$ |
67,616 |
|
|
6.20 |
% |
$ |
1,314,173 |
|
$ |
66,172 |
|
|
7.09 |
% |
Taxable
Investment Securities |
|
|
118,903 |
|
|
729 |
|
|
2.45 |
% |
|
108,234 |
|
|
841 |
|
|
3.09 |
% |
|
125,057 |
|
|
2,109 |
|
|
2.25 |
% |
|
121,680 |
|
|
2,951 |
|
|
3.24 |
% |
Tax-Exempt
Investment Securities(2) |
|
|
51,768 |
|
|
715 |
|
|
5.53 |
% |
|
60,306 |
|
|
898 |
|
|
5.96 |
% |
|
52,077 |
|
|
2,267 |
|
|
5.81 |
% |
|
62,527 |
|
|
2,776 |
|
|
5.92 |
% |
Funds
Sold |
|
|
39,636 |
|
|
147 |
|
|
1.44 |
% |
|
130,010 |
|
|
303 |
|
|
0.91 |
% |
|
62,121 |
|
|
486 |
|
|
1.03 |
% |
|
122,394 |
|
|
987 |
|
|
1.06 |
% |
Total
Earning Assets |
|
|
1,734,708 |
|
|
24,936 |
|
|
5.72 |
% |
|
1,634,689 |
|
|
23,838 |
|
|
5.79 |
% |
|
1,697,081 |
|
|
72,478 |
|
|
5.70 |
% |
|
1,620,774 |
|
|
72,886 |
|
|
6.31 |
% |
Cash
& Due From Banks |
|
|
90,010 |
|
|
|
|
|
|
|
|
80,246 |
|
|
|
|
|
|
|
|
90,086 |
|
|
|
|
|
|
|
|
79,071 |
|
|
|
|
|
|
|
Allowance
for Loan Losses |
|
|
(13,029 |
) |
|
|
|
|
|
|
|
(12,534 |
) |
|
|
|
|
|
|
|
(13,185 |
) |
|
|
|
|
|
|
|
(12,561 |
) |
|
|
|
|
|
|
Other
Assets |
|
|
129,683 |
|
|
|
|
|
|
|
|
113,604 |
|
|
|
|
|
|
|
|
126,619 |
|
|
|
|
|
|
|
|
112,671 |
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
1,941,372 |
|
|
|
|
|
|
|
$ |
1,816,005 |
|
|
|
|
|
|
|
$ |
1,900,601 |
|
|
|
|
|
|
|
$ |
1,799,955 |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW
Accounts |
|
$ |
280,630 |
|
$ |
153 |
|
|
0.22 |
% |
$ |
263,729 |
|
$ |
151 |
% |
|
0.23 |
|
$ |
278,609 |
|
$ |
398 |
|
|
0.19 |
% |
$ |
261,011 |
|
$ |
546 |
|
|
0.28 |
% |
Money
Market Accounts |
|
|
212,426 |
|
|
245 |
|
|
0.46 |
% |
|
220,924 |
|
|
257 |
|
|
0.46 |
% |
|
214,410 |
|
|
723 |
|
|
0.45 |
% |
|
215,616 |
|
|
1,069 |
|
|
0.66 |
% |
Savings
Accounts |
|
|
130,330 |
|
|
32 |
|
|
0.10 |
% |
|
111,644 |
|
|
28 |
|
|
0.10 |
% |
|
125,351 |
|
|
92 |
|
|
0.10 |
% |
|
109,123 |
|
|
161 |
|
|
0.20 |
% |
Other
Time Deposits |
|
|
429,702 |
|
|
2,004 |
|
|
1.86 |
% |
|
434,206 |
|
|
2,293 |
|
|
2.10 |
% |
|
427,913 |
|
|
6,000 |
|
|
1.87 |
% |
|
434,513 |
|
|
7,232 |
|
|
2.23 |
% |
Total
Int. Bearing Deposits |
|
|
1,053,088 |
|
|
2,434 |
|
|
0.92 |
% |
|
1,030,503 |
|
|
2,729 |
|
|
1.05 |
% |
|
1,046,283 |
|
|
7,213 |
|
|
0.92 |
% |
|
1,020,263 |
|
|
9,008 |
|
|
1.18 |
% |
Short-Term
Borrowings |
|
|
96,146 |
|
|
332 |
|
|
1.37 |
% |
|
92,316 |
|
|
282 |
|
|
1.21 |
% |
|
103,398 |
|
|
868 |
|
|
1.12 |
% |
|
100,488 |
|
|
951 |
|
|
1.27 |
% |
Long-Term
Debt |
|
|
59,837 |
|
|
642 |
|
|
4.27 |
% |
|
53,041 |
|
|
495 |
|
|
3.70 |
% |
|
53,560 |
|
|
1,726 |
|
|
4.30 |
% |
|
59,878 |
|
|
1,541 |
|
|
3.44 |
% |
Total
Interest Bearing Liabilities |
|
|
1,209,071 |
|
|
3,408 |
|
|
1.12 |
% |
|
1,175,860 |
|
|
3,506 |
|
|
1.18 |
% |
|
1,203,241 |
|
|
9,807 |
|
|
1.09 |
% |
|
1,180,629 |
|
|
11,500 |
|
|
1.30 |
% |
Noninterest
Bearing Deposits |
|
|
492,136 |
|
|
|
|
|
|
|
|
421,376 |
|
|
|
|
|
|
|
|
467,504 |
|
|
|
|
|
|
|
|
405,045 |
|
|
|
|
|
|
|
Other
Liabilities |
|
|
22,892 |
|
|
|
|
|
|
|
|
19,709 |
|
|
|
|
|
|
|
|
18,541 |
|
|
|
|
|
|
|
|
19,497 |
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
|
1,724,099 |
|
|
|
|
|
|
|
|
1,616,945 |
|
|
|
|
|
|
|
|
1,689,286 |
|
|
|
|
|
|
|
|
1,605,171 |
|
|
|
|
|
|
|
SHAREOWNERS'
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
|
133 |
|
|
|
|
|
|
|
|
132 |
|
|
|
|
|
|
|
|
133 |
|
|
|
|
|
|
|
|
117 |
|
|
|
|
|
|
|
Surplus |
|
|
18,167 |
|
|
|
|
|
|
|
|
15,465 |
|
|
|
|
|
|
|
|
17,757 |
|
|
|
|
|
|
|
|
15,171 |
|
|
|
|
|
|
|
Other
Comprehensive Income |
|
|
244 |
|
|
|
|
|
|
|
|
2,144 |
|
|
|
|
|
|
|
|
819 |
|
|
|
|
|
|
|
|
2,570 |
|
|
|
|
|
|
|
Retained
Earnings |
|
|
198,729 |
|
|
|
|
|
|
|
|
181,319 |
|
|
|
|
|
|
|
|
192,606 |
|
|
|
|
|
|
|
|
176,926 |
|
|
|
|
|
|
|
TOTAL
SHAREOWNERS' EQUITY |
|
|
217,273 |
|
|
|
|
|
|
|
|
199,060 |
|
|
|
|
|
|
|
|
211,315 |
|
|
|
|
|
|
|
|
194,784 |
|
|
|
|
|
|
|
TOTAL
LIABILITIES & EQUITY |
|
$ |
1,941,372 |
|
|
|
|
|
|
|
$ |
1,816,005 |
|
|
|
|
|
|
|
$ |
1,900,601 |
|
|
|
|
|
|
|
$ |
1,799,955 |
|
|
|
|
|
|
|
Interest
Rate Spread |
|
|
|
|
|
|
|
|
4.60 |
% |
|
|
|
|
|
|
|
4.61 |
% |
|
|
|
|
|
|
|
4.61 |
% |
|
|
|
|
|
|
|
4.71 |
% |
Net
Interest Income |
|
|
|
|
$ |
21,528 |
|
|
|
|
|
|
|
$ |
20,332 |
|
|
|
|
|
|
|
$ |
62,671 |
|
|
|
|
|
|
|
$ |
61,386 |
|
|
|
|
Net
Yield on Earning Assets |
|
|
|
|
|
|
|
|
4.94 |
% |
|
|
|
|
|
|
|
4.94 |
% |
|
|
|
|
|
|
|
4.93 |
% |
|
|
|
|
|
|
|
5.06 |
% |
(1
Average
balances include nonaccrual loans. Interest income includes fees on loans of
approximately $336,000 and $1.2 million for the three and nine months ended
September 30, 2004, versus $417,000 and $1.5 million, for the comparable periods
ended September 30, 2003.
(2)
Interest income includes the effects of taxable equivalent adjustments using a
35% federal tax rate.
Quantitative
and Qualitative Disclosure About Market Risk
Overview
Market
risk management arises from changes in interest rates, exchange rates, commodity
prices, and equity prices. CCBG has risk management policies to monitor and
limit exposure to market risk and does 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, policies are in
place that are designed to minimize structural interest rate risk.
Interest
Rate Risk Management
The
normal course of business activity exposes CCBG to interest rate risk.
Fluctuations in interest rates may result in changes in the fair market value of
CCBG's financial instruments, cash flows and net interest income. CCBG seeks to
avoid fluctuations in its net interest margin and to maximize net interest
income within acceptable levels of risk through periods of changing interest
rates. Accordingly, CCBG’s interest rate sensitivity and liquidity are monitored
on an ongoing basis by its Asset and Liability Committee ("ALCO"), which
oversees market risk management and establishes risk measures, limits and policy
guidelines for managing the amount of interest rate risk and its effects on net
interest income and capital. A variety of measures are used to provide for a
comprehensive view of the magnitude of interest rate risk, the distribution of
risk, the level of risk over time and the exposure to changes in certain
interest rate relationships.
ALCO
continuously monitors and manages the balance between interest rate-sensitive
assets and liabilities. ALCO's objective is to manage the impact of fluctuating
market rates on net interest income within acceptable levels. In order to meet
this objective, management may adjust the rates charged/paid on loans/deposits
or may shorten/lengthen the duration of assets or liabilities within the
parameters set by ALCO.
The
financial assets and liabilities of CCBG are classified as other-than-trading.
An analysis of the other-than-trading financial components, including the fair
values, are presented in the table on page 144. This table presents CCBG's
consolidated interest rate sensitivity position as of year-end 2003 based upon
certain assumptions as set forth in the Notes to the Table. The objective of
interest rate sensitivity analysis is to measure the impact on CCBG's net
interest income due to fluctuations in interest rates. The asset and liability
values presented in the table on page 144 may not necessarily be indicative of
CCBG's interest rate sensitivity over an extended period of time.
CCBG
expects rising rates to have a favorable impact on the net interest margin,
subject to the magnitude and timeframe over which the rate changes occur.
However, as general interest rates rise or fall, other factors such as current
market conditions and competition may impact how CCBG responds to changing rates
and thus impact the magnitude of change in net interest income. Nonmaturity
deposits offer management greater discretion as to the direction, timing, and
magnitude of interest rate changes and can have a material impact on CCBG's
interest rate sensitivity. In addition, the relative level of interest rates as
compared to the current yields/rates of existing assets/liabilities can impact
both the direction and magnitude of the change in net interest margin as rates
rise and fall from one period to the next.
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 CCBG's ability to react to changing interest
rates."
Financial
Assets and Liabilities Market Risk Analysis (1)
Other
Than Trading Portfolio
|
|
Maturing
or Repricing in: |
|
|
|
(Dollars
in Thousands) |
|
Year
1 |
|
Year
2 |
|
Year
3 |
|
Year
4 |
|
Year
5 |
|
Beyond |
|
Total |
|
Fair
Value |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
Rate |
|
|
189,937 |
|
$ |
109,418 |
|
$ |
66,709 |
|
$ |
28,405 |
|
$ |
18,281 |
|
$ |
24,039 |
|
|
436,189 |
|
|
443,801 |
|
Average
Interest Rate |
|
|
7.28 |
% |
|
7.55 |
% |
|
7.29 |
% |
|
7.64 |
% |
|
7.26 |
% |
|
6.70 |
% |
|
7.34 |
% |
|
|
|
Floating
Rate(2) |
|
|
561,911 |
|
|
134,646 |
|
|
168,809 |
|
|
18,042 |
|
|
6,163 |
|
|
15,872 |
|
|
905,443 |
|
|
921,740 |
|
Average
Interest Rate |
|
|
5.61 |
% |
|
6.80 |
% |
|
6.47 |
% |
|
7.37 |
% |
|
7.24 |
% |
|
6.97 |
% |
|
5.78 |
% |
|
|
|
Investment
Securities:(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
Rate |
|
|
111,775 |
|
|
48,948 |
|
|
7,935 |
|
|
2,016 |
|
|
1,409 |
|
|
8,104 |
|
|
180,187 |
|
|
181,719 |
|
Average
Interest Rate |
|
|
2.00 |
% |
|
3.20 |
% |
|
4.75 |
% |
|
4.98 |
% |
|
5.54 |
% |
|
4.24 |
% |
|
2.55 |
% |
|
|
|
Floating
Rate |
|
|
1,547 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,547 |
|
|
15 |
|
Average
Interest Rate |
|
|
4.15 |
% |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4.15 |
% |
|
|
|
Other
Earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
Rate |
|
|
125,452 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
125,452 |
|
|
125,452 |
|
Average
Interest Rate |
|
|
0.92 |
% |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.92 |
% |
|
|
|
Total
Financial Assets |
|
|
990,022 |
|
$ |
293,012 |
|
$ |
243,453 |
|
$ |
48,463 |
|
$ |
25,853 |
|
$ |
48,015 |
|
$ |
1,648,818 |
|
$ |
1,672,727 |
|
Average
Interest Rate |
|
|
4.91 |
% |
|
6.48 |
% |
|
6.64 |
% |
|
7.43 |
% |
|
7.16 |
% |
|
6.89 |
% |
|
5.47 |
% |
|
|
|
Deposits:(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
Rate |
|
|
327,213 |
|
$ |
64,891 |
|
$ |
22,590 |
|
$ |
8,466 |
|
$ |
1,815 |
|
|
6 |
|
|
424,981 |
|
|
426,406 |
|
Average
Interest Rate |
|
|
1.69 |
% |
|
2.79 |
% |
|
3.16 |
% |
|
3.60 |
% |
|
2.92 |
% |
|
4.85 |
% |
|
1.98 |
% |
|
|
|
Floating
Rate |
|
|
595,001 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
595,001 |
|
|
595,001 |
|
Average
Interest Rate |
|
|
0.27 |
% |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.27 |
% |
|
|
|
Other
Interest Bearing Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
Rate Debt |
|
|
2,886 |
|
|
18,123 |
|
|
2,619 |
|
|
2,713 |
|
|
2,772 |
|
|
17,344 |
|
|
46,475 |
|
|
47,078 |
|
Average
Interest Rate |
|
|
4.80 |
% |
|
3.32 |
% |
|
4.58 |
% |
|
4.60 |
% |
|
4.60 |
% |
|
4.92 |
% |
|
4.23 |
% |
|
|
|
Floating
Rate Debt |
|
|
108,184 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
108,184 |
|
|
108,184 |
|
Average
Interest Rate |
|
|
0.96 |
% |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.96 |
% |
|
|
|
Total
Financial Liabilities |
|
$ |
1,033,284 |
|
$ |
83,014 |
|
$ |
25,209 |
|
$ |
11,197 |
|
$ |
4,587 |
|
$ |
17,350 |
|
$ |
1,174,641 |
|
$ |
1,176,669 |
|
Average
Interest Rate |
|
|
1.04 |
% |
|
2.90 |
% |
|
3.31 |
% |
|
3.85 |
% |
|
3.94 |
% |
|
4.92 |
% |
|
1.12 |
% |
|
|
|
(1) Based
upon expected cash flows unless otherwise
indicated.
(2) Based
upon a combination of expected maturities and repricing
opportunities.
(3) Based
upon contractual maturity, except for callable and floating rate securities,
which are based on expected maturity and
weighted average life, respectively.
(4) Savings,
NOW and money market accounts can be repriced at any time, therefore, all such
balances are included as floatingrate deposits. Time deposit balances are classified
according to maturity.
Quarterly
Financial Data (Unaudited)
(Dollars
in Thousands, Except Per Share Data)(1)
|
|
2004 |
|
2003 |
|
2002 |
|
|
|
Third |
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
|
First |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary
of Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income |
|
$ |
24,660 |
|
$ |
24,265 |
|
$ |
22,670 |
|
$ |
23,022 |
|
$ |
23,484 |
|
$ |
23,997 |
|
$ |
24,327 |
|
$ |
25,566 |
|
$ |
25,896 |
|
$ |
26,195 |
|
$ |
26,508 |
|
Interest
Expense |
|
|
3,408 |
|
|
3,221 |
|
|
3,178 |
|
|
3,339 |
|
|
3,506 |
|
|
3,894 |
|
|
4,100 |
|
|
4,667 |
|
|
4,946 |
|
|
5,693 |
|
|
7,197 |
|
Net
Interest Income |
|
|
21,252 |
|
|
21,044 |
|
|
19,492 |
|
|
19,683 |
|
|
19,978 |
|
|
20,103 |
|
|
20,227 |
|
|
20,899 |
|
|
20,950 |
|
|
20,502 |
|
|
19,311 |
|
Provision
for Loan Losses |
|
|
300 |
|
|
580 |
|
|
961 |
|
|
850 |
|
|
921 |
|
|
886 |
|
|
779 |
|
|
863 |
|
|
991 |
|
|
641 |
|
|
802 |
|
Net
Interest Income After Provision for
Loan Losses |
|
|
20,952 |
|
|
20,464 |
|
|
18,531 |
|
|
18,833 |
|
|
19,057 |
|
|
19,217 |
|
|
19,448 |
|
|
20,036 |
|
|
19,959 |
|
|
19,861 |
|
|
18,509 |
|
Gain
on Sale of Credit Card Portfolio |
|
|
6,857 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Noninterest
Income |
|
|
10,864 |
|
|
11,031 |
|
|
9,881 |
|
|
10,614 |
|
|
10,952 |
|
|
10,428 |
|
|
9,945 |
|
|
10,898 |
|
|
8,810 |
|
|
8,334 |
|
|
8,061 |
|
Conversion/Merger
Expense |
|
|
68 |
|
|
4 |
|
|
42 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
59 |
|
|
— |
|
|
39 |
|
|
114 |
|
Noninterest
Expense |
|
|
21,565 |
|
|
21,597 |
|
|
21,033 |
|
|
20,593 |
|
|
20,184 |
|
|
19,516 |
|
|
19,428 |
|
|
20,485 |
|
|
19,742 |
|
|
19,671 |
|
|
18,585 |
|
Income
Before Provision for Income
Taxes |
|
|
17,040 |
|
|
9,894 |
|
|
7,337 |
|
|
8,854 |
|
|
9,825 |
|
|
10,129 |
|
|
9,965 |
|
|
10,390 |
|
|
9,027 |
|
|
8,485 |
|
|
7,871 |
|
Provision
for Income Taxes |
|
|
6,221 |
|
|
3,451 |
|
|
2,490 |
|
|
2,758 |
|
|
3,529 |
|
|
3,689 |
|
|
3,604 |
|
|
3,668 |
|
|
3,226 |
|
|
3,037 |
|
|
2,760 |
|
Net
Income |
|
$ |
10,819 |
|
$ |
6,443 |
|
$ |
4,847 |
|
$ |
6,096 |
|
$ |
6,296 |
|
$ |
6,440 |
|
$ |
6,361 |
|
$ |
6,722 |
|
$ |
5,801 |
|
$ |
5,448 |
|
$ |
5,111 |
|
Net
Interest Income (FTE) |
|
$ |
21,528 |
|
$ |
21,333 |
|
$ |
19,811 |
|
$ |
20,020 |
|
$ |
20,332 |
|
$ |
20,456 |
|
$ |
20,597 |
|
$ |
21,300 |
|
|
21,367 |
|
|
20,928 |
|
|
19,750 |
|
Per
Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income Basic |
|
$ |
.82 |
|
$ |
.48 |
|
$ |
.37 |
|
$ |
.47 |
|
$ |
.47 |
|
$ |
.49 |
|
$ |
.48 |
|
$ |
.51 |
|
$ |
.44 |
|
$ |
.41 |
|
$ |
.38 |
|
Net
Income Diluted |
|
|
.82 |
|
|
.48 |
|
|
.37 |
|
|
.46 |
|
|
.47 |
|
|
.49 |
|
|
.48 |
|
|
.51 |
|
|
.44 |
|
|
.41 |
|
|
.38 |
|
Dividends
Declared |
|
|
.180 |
|
|
.180 |
|
|
.180 |
|
|
.180 |
|
|
.170 |
|
|
.170 |
|
|
.136 |
|
|
.136 |
|
|
.122 |
|
|
.122 |
|
|
.122 |
|
Diluted
Book Value |
|
|
16.48 |
|
|
15.80 |
|
|
15.54 |
|
|
15.27 |
|
|
15.00 |
|
|
14.73 |
|
|
14.42 |
|
|
14.08 |
|
|
13.67 |
|
|
13.33 |
|
|
13.15 |
|
Market
Price: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
41.20 |
|
|
43.15 |
|
|
45.55 |
|
|
46.83 |
|
|
40.93 |
|
|
36.43 |
|
|
32.32 |
|
|
32.04 |
|
|
29.55 |
|
|
27.84 |
|
|
22.00 |
|
Low |
|
|
33.33 |
|
|
35.50 |
|
|
39.05 |
|
|
36.62 |
|
|
35.00 |
|
|
29.74 |
|
|
26.81 |
|
|
22.26 |
|
|
22.32 |
|
|
20.60 |
|
|
18.12 |
|
Close |
|
|
38.71 |
|
|
39.59 |
|
|
41.25 |
|
|
45.99 |
|
|
38.16 |
|
|
36.08 |
|
|
31.29 |
|
|
31.35 |
|
|
26.45 |
|
|
27.62 |
|
|
21.60 |
|
Selected
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
1,524,401 |
|
$ |
1,491,142 |
|
$ |
1,357,206 |
|
$ |
1,329,673 |
|
$ |
1,336,139 |
|
$ |
1,316,705 |
|
$ |
1,289,161 |
|
$ |
1,292,892 |
|
$ |
1,266,591 |
|
$ |
1,234,787 |
|
$ |
1,229,344 |
|
Earning
Assets |
|
|
1,734,708 |
|
|
1,721,655 |
|
|
1,634,468 |
|
|
1,636,269 |
|
|
1,634,689 |
|
|
1,612,133 |
|
|
1,615,287 |
|
|
1,591,535 |
|
|
1,511,485 |
|
|
1,547,603 |
|
|
1,575,698 |
|
Assets |
|
|
1,941,372 |
|
|
1,929,485 |
|
|
1,830,496 |
|
|
1,819,552 |
|
|
1,816,005 |
|
|
1,786,991 |
|
|
1,796,657 |
|
|
1,762,174 |
|
|
1,678,620 |
|
|
1,720,095 |
|
|
1,748,211 |
|
Deposits |
|
|
1,545,224 |
|
|
1,538,630 |
|
|
1,457,160 |
|
|
1,451,095 |
|
|
1,451,879 |
|
|
1,415,798 |
|
|
1,407,763 |
|
|
1,404,818 |
|
|
1,388,396 |
|
|
1,440,615 |
|
|
1,467,257 |
|
Shareowners’
Equity |
|
|
217,273 |
|
|
210,211 |
|
|
206,395 |
|
|
201,939 |
|
|
199,060 |
|
|
194,781 |
|
|
190,416 |
|
|
185,412 |
|
|
180,910 |
|
|
176,678 |
|
|
175,485 |
|
Common
Equivalent Average Shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
13,283 |
|
|
13,274 |
|
|
13,262 |
|
|
13,223 |
|
|
13,221 |
|
|
13,209 |
|
|
13,207 |
|
|
13,189 |
|
|
13,189 |
|
|
13,219 |
|
|
13,305 |
|
Diluted |
|
|
13,287 |
|
|
13,277 |
|
|
13,286 |
|
|
13,265 |
|
|
13,260 |
|
|
13,255 |
|
|
13,253 |
|
|
13,238 |
|
|
13,238 |
|
|
13,257 |
|
|
13,343 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROA |
|
|
2.22 |
% |
|
1.34 |
% |
|
1.06 |
% |
|
1.33 |
% |
|
1.38 |
% |
|
1.45 |
% |
|
1.44 |
% |
|
1.51 |
% |
|
1.37 |
% |
|
1.27 |
% |
|
1.19 |
% |
ROE |
|
|
19.81 |
% |
|
12.33 |
% |
|
9.45 |
% |
|
11.98 |
% |
|
12.55 |
% |
|
13.26 |
% |
|
13.55 |
% |
|
14.38 |
% |
|
12.72 |
% |
|
12.37 |
% |
|
11.81 |
% |
Net
Interest Margin (FTE) |
|
|
4.94 |
% |
|
4.99 |
% |
|
4.88 |
% |
|
4.85 |
% |
|
4.94 |
% |
|
5.09 |
% |
|
5.17 |
% |
|
5.32 |
% |
|
5.61 |
% |
|
5.42 |
% |
|
5.07 |
% |
Efficiency
Ratio |
|
|
52.60 |
|
(2) |
63.87 |
% |
|
68.06 |
% |
|
64.58 |
% |
|
61.93 |
% |
|
60.57 |
% |
|
60.96 |
% |
|
61.11 |
% |
|
62.73 |
% |
|
64.45 |
% |
|
63.91 |
% |
(1) All
share and per share data have been adjusted to reflect the 5-for-4 stock split
effective June 13, 2003.
(2)
Includes $4.2 million (after-tax) one-time gain on sale of credit card
portfolio.
SECTION
VII
SHAREOWNER
PROPOSALS
Shareowner
proposals that are to be included in the CCBG proxy statement for the 2005
annual meeting of shareowners must have been received by December 3, 2004.
Shareowner proposals for the 2005 annual meeting that are not intended to be
included in the proxy statement for that meeting must have been received by
February 18, 2005 or the Board of Directors can vote the proxies in its
discretion on the proposal. Relevant deadlines regarding shareowner proposals
for the 2006 annual meeting of shareowners have not yet been determined.
Proposals must comply with the proxy rules and be submitted in writing to: J.
Kimbrough Davis, Corporate Secretary, Capital City Bank Group, Inc., 217 North
Monroe Street, Tallahassee, Florida 32301.
EXPERTS
The
consolidated financial statements of CCBG and subsidiary (the “Company”) as of
December 31, 2003 and 2002, and for the years then ended, have been included
herein and in the Registration Statement in reliance upon the report of KPMG
LLP, an independent registered public accounting firm, included herein, and upon
the authority of said firm as experts in accounting and auditing.
The audit
report covering the consolidated financial statements refers to CCBG’s change in
method of recording stock-based compensation in 2003 and a change in method of
accounting for goodwill and other intangible assets in 2002. The audit report
also refers to KPMG LLP’s audit of the transitional disclosures required by
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, to revise the 2001 consolidated financial statements, as more
fully described in Note 6 to the consolidated financial statements included in
this Proxy Statement/Prospectus in Section XII, on page 245.
However, KPMG LLP was not engaged to audit, review, or apply any procedures to
the 2001 consolidated financial statements other than with respect to such
disclosures.
LEGAL
MATTERS
The
legality of the shares of CCBG common stock to be issued is the merger and
certain tax consequences of the merger will be passed upon by Gunster, Yoakley
& Stewart P.A., Ft. Lauderdale, Florida.
Certain
tax consequences of the merger will be passed upon by Smith, Gambrell &
Russell, LLP, Atlanta, Georgia.
OTHER
MATTERS
Management
of First Alachua does not know of any matters to be brought before the Special
Meeting other than those described above. If any other matters properly come
before the Special Meeting, the persons designated as Proxies will vote on such
matters in accordance with their best judgment.
PRO
FORMA FINANCIAL INFORMATION
Pro Forma
financial information reflecting the acquisition of First Alachua by CCBG is not
presented in this document since the pro forma effect is not
significant.
AGREEMENT
AND PLAN OF MERGER BY AND AMONG CAPITAL CITY BANK GROUP, INC.,
FIRST ALACHUA
BANKING CORPORATION AND FIRST NATIONAL BANK OF ALACHUA,
DATED
AS OF FEBRUARY
3, 2005
(Page
numbers below refer to the page numbers in the original Agreement and Plan of
Merger)
ARTICLE
1 |
|
TRANSACTIONS
AND TERMS OF MERGERS |
1 |
1.1 |
|
HOLDING
COMPANY MERGER |
1 |
1.2 |
|
BANK
MERGER |
2 |
1.3 |
|
TIME
AND PLACE OF CLOSING |
2 |
1.4 |
|
EFFECTIVE
TIME |
2 |
1.5 |
|
ARTICLES
OF INCORPORATION |
2 |
1.6 |
|
BYLAWS |
2 |
1.7 |
|
DIRECTORS
AND OFFICERS |
2 |
ARTICLE
2 |
|
MANNER
OF CONVERTING SHARES |
3 |
2.1 |
|
CONVERSION
OF SHARES |
3 |
2.2 |
|
ANTI-DILUTION
PROVISIONS |
4 |
2.3 |
|
SHARES
HELD BY FABC SHAREHOLDERS OR CCBG |
4 |
2.4 |
|
DISSENTING
SHAREHOLDERS |
4 |
2.5 |
|
FRACTIONAL
SHARES |
4 |
ARTICLE
3 |
|
EXCHANGE
OF SHARES |
4 |
3.1 |
|
EXCHANGE
PROCEDURES |
4 |
3.2 |
|
RIGHTS
OF FORMER FABC SHAREHOLDERS |
5 |
ARTICLE
4 |
|
REPRESENTATIONS
AND WARRANTIES OF FABC |
6 |
4.1 |
|
ORGANIZATION,
STANDING, AND POWER |
6 |
4.2 |
|
AUTHORITY
OF FABC AND FIRST NATIONAL; NO BREACH BY AGREEMENT |
7 |
4.3 |
|
CAPITAL
STOCK |
8 |
4.4 |
|
INVESTMENTS;
SUBSIDIARIES |
8 |
4.5 |
|
FINANCIAL
STATEMENTS |
9 |
4.6 |
|
ABSENCE
OF UNDISCLOSED LIABILITIES |
9 |
4.7 |
|
ABSENCE
OF CERTAIN CHANGES OR EVENTS |
9 |
4.8 |
|
TAX
MATTERS |
10 |
4.9 |
|
ALLOWANCE
FOR POSSIBLE LOAN LOSSES |
13 |
4.10 |
|
ASSETS |
13 |
4.11 |
|
INTELLECTUAL
PROPERTY |
14 |
4.12 |
|
ENVIRONMENTAL
MATTERS |
15 |
4.13 |
|
COMPLIANCE
WITH LAWS |
16 |
4.14 |
|
LABOR
RELATIONS |
17 |
4.15 |
|
EMPLOYEE
BENEFIT PLANS |
17 |
4.16 |
|
MATERIAL
CONTRACTS |
21 |
4.17 |
|
LEGAL
PROCEEDINGS |
21 |
4.18 |
|
REPORTS |
22 |
4.19 |
|
STATEMENTS
TRUE AND CORRECT |
22 |
4.20 |
|
ACCOUNTING,
TAX, AND REGULATORY MATTERS |
22 |
4.21 |
|
STATE
TAKEOVER LAWS |
23 |
4.22 |
|
CHARTER
PROVISIONS |
23 |
4.23 |
|
OPINION
OF FINANCIAL ADVISOR |
23 |
4.24 |
|
BOARD
RECOMMENDATION |
23 |
ARTICLE
5 |
|
REPRESENTATIONS
AND WARRANTIES OF CCBG |
23 |
5.1 |
|
ORGANIZATION,
STANDING, AND POWER |
23 |
5.2 |
|
AUTHORITY
OF CCBG; NO BREACH BY AGREEMENT |
24 |
5.3 |
|
CAPITAL
STOCK |
24 |
5.4 |
|
CCBG
SUBSIDIARIES |
25 |
5.5 |
|
SEC
FILINGS; FINANCIAL STATEMENTS |
25 |
5.6 |
|
ABSENCE
OF UNDISCLOSED LIABILITIES |
25 |
5.7 |
|
ABSENCE
OF CERTAIN CHANGES OR EVENTS |
26 |
5.8 |
|
ALLOWANCE
FOR POSSIBLE LOAN LOSSES |
26 |
5.9 |
|
INTELLECTUAL
PROPERTY |
26 |
5.10 |
|
COMPLIANCE
WITH LAWS |
27 |
5.11 |
|
LEGAL
PROCEEDINGS |
27 |
5.12 |
|
REPORTS |
28 |
5.13 |
|
STATEMENTS
TRUE AND CORRECT |
28 |
5.14 |
|
ACCOUNTING,
TAX AND REGULATORY MATTERS |
28 |
ARTICLE
6 |
|
CONDUCT
OF BUSINESS PENDING CONSUMMATION |
29 |
6.1 |
|
AFFIRMATIVE
COVENANTS OF FABC AND FIRST NATIONAL |
29 |
6.2 |
|
NEGATIVE
COVENANTS OF FABC AND FIRST NATIONAL |
29 |
6.3 |
|
COVENANTS
OF CCBG |
31 |
6.4 |
|
ADVERSE
CHANGES IN CONDITION |
32 |
6.5 |
|
REPORTS |
32 |
6.6 |
|
TAXES |
32 |
ARTICLE
7 |
|
ADDITIONAL
AGREEMENTS |
34 |
7.1 |
|
REGISTRATION
STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL |
34 |
7.2 |
|
NASDAQ
LISTING |
34 |
7.3 |
|
APPLICATIONS |
34 |
7.4 |
|
FILINGS
WITH STATE OFFICES |
35 |
7.5 |
|
AGREEMENT
AS TO EFFORTS TO CONSUMMATE |
35 |
7.6 |
|
INVESTIGATION
AND CONFIDENTIALITY |
35 |
7.7 |
|
PRESS
RELEASES |
36 |
7.8 |
|
CERTAIN
ACTIONS |
37 |
7.9 |
|
ACCOUNTING
AND TAX TREATMENT |
37 |
7.10 |
|
STATE
TAKEOVER LAWS |
37 |
7.11 |
|
CHARTER
PROVISIONS |
37 |
7.12 |
|
FABC
AND FIRST NATIONAL MEETINGS |
37 |
7.13 |
|
AGREEMENT
OF AFFILIATES |
38 |
7.14 |
|
EMPLOYEE
BENEFITS AND CONTRACTS |
38 |
7.15 |
|
ALACHUA
401(K) PLAN QUALIFICATION |
39 |
7.16 |
|
INDEMNIFICATION |
40 |
7.17 |
|
CERTAIN
POLICIES OF FABC |
41 |
7.18 |
|
DIRECTOR
AND VOTING AGREEMENTS |
41 |
7.19 |
|
PAYMENT
OF BONUS |
41 |
7.20 |
|
REAL
PROPERTY MATTERS |
42 |
7.21 |
|
FAIRNESS
OPINION |
43 |
7.22 |
|
NON-COMPETITION
AGREEMENTS |
43 |
7.23 |
|
FABC
AUDITED FINANCIAL STATEMENTS |
43 |
7.24 |
|
ALLOWANCE
FOR POSSIBLE LOAN LOSSES |
44 |
ARTICLE
8 |
|
CONDITIONS
PRECEDENT TO OBLIGATIONS TO CONSUMMATE |
44 |
8.1 |
|
CONDITIONS
TO OBLIGATIONS OF EACH PARTY |
44 |
8.2 |
|
CONDITIONS
TO OBLIGATIONS OF CCBG |
45 |
8.3 |
|
CONDITIONS
TO OBLIGATIONS OF FABC AND FIRST NATIONAL |
47 |
ARTICLE
9 |
|
TERMINATION |
48 |
9.1 |
|
TERMINATION |
48 |
9.2 |
|
EFFECT
OF TERMINATION |
49 |
9.3 |
|
ALTERNATE
TRANSACTION |
50 |
9.4 |
|
NON-SURVIVAL
OF REPRESENTATIONS AND COVENANTS |
50 |
ARTICLE
10 |
|
MISCELLANEOUS |
50 |
10.1 |
|
DEFINITIONS |
50 |
10.2 |
|
EXPENSES |
61 |
10.3 |
|
BROKERS
AND FINDERS |
61 |
10.4 |
|
ENTIRE
AGREEMENT |
61 |
10.5 |
|
AMENDMENTS |
61 |
10.6 |
|
WAIVERS |
62 |
10.7 |
|
ASSIGNMENT |
62 |
10.8 |
|
NOTICES |
62 |
10.9 |
|
GOVERNING
LAW |
63 |
10.10 |
|
COUNTERPARTS |
63 |
10.11 |
|
CAPTIONS;
ARTICLES AND SECTIONS |
64 |
10.12 |
|
INTERPRETATIONS |
64 |
10.13 |
|
ENFORCEMENT
OF AGREEMENT |
64 |
10.14 |
|
ENFORCEMENT
COSTS |
64 |
10.15 |
|
SEVERABILITY |
64 |
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER (this
“Agreement”) is made and entered into as of February 3, 2005, by and among
CAPITAL CITY BANK GROUP, INC., a Florida corporation (“CCBG”), FIRST ALACHUA
BANKING CORPORATION, a Florida corporation (“FABC”), and FIRST NATIONAL BANK OF
ALACHUA, a national bank (“First National”).
PREAMBLE
The
respective Boards of Directors of CCBG, FABC, and First National are of the
opinion that the transactions described herein are in the best interests of the
parties to this Agreement and their respective shareowners. This Agreement
provides for the acquisition of FABC by CCBG pursuant to the merger of (i) FABC
with and into CCBG (the “Holding Company Merger”) and (ii) First National
with and into a Florida chartered bank subsidiary of CCBG, Capital City Bank
(“CCB”) (the “Bank Merger”) (collectively, the “Mergers”). At the effective time
of the Holding Company Merger, the outstanding shares of the capital stock of
FABC shall be converted into the right to receive a combination of shares of the
common stock of CCBG and cash as described in this Agreement. As a result,
shareholders of FABC shall become shareowners of CCBG and CCBG shall conduct the
business and operations of First National. The transactions described in this
Agreement are subject to the approvals of the shareholders of FABC, the Board of
Governors of the Federal Reserve System, the Florida Department of Financial
Services, and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the
Mergers, for federal income tax purposes, shall qualify as a “reorganization”
within the meaning of Section 368(a)(1)(A) of the Code.
Certain
terms used in this Agreement are defined in Section 10.1 of this
Agreement.
NOW,
THEREFORE, in
consideration of the above and the mutual warranties, representations,
covenants, and agreements set forth herein, the parties, intending to be legally
bound, agree as follows:
ARTICLE
1
TRANSACTIONS
AND TERMS OF MERGERs
1.1 HOLDING
COMPANY MERGER.
Subject
to the terms and conditions of this Agreement, at the Effective Time, FABC shall
be merged with and into CCBG in accordance with the provisions of, and with the
effect provided in, Sections 607.1101, 607.1103, 607.1105, 607.1106 and 607.1107
of the FBCA. CCBG shall be the Surviving Corporation resulting from the Holding
Company Merger and shall continue to be governed by the Laws of the State of
Florida. The Holding Company Merger shall be consummated pursuant to the terms
of this Agreement, which has been approved and adopted by the respective Boards
of Directors of FABC and CCBG.
1.2 BANK
MERGER.
Subsequent to the consummation of the Holding Company Merger, First National
shall be merged with and into CCB in accordance with the provisions of and with
the effect provided in Section 658.41 of the Florida Statutes on terms and
subject to the provisions of the Bank Plan of Merger (“Bank Plan”), attached
hereto as Exhibit 1. FABC shall vote the shares of First National Capital Stock
in favor of the Bank Plan and the Bank Merger provided therein.
1.3 TIME
AND PLACE OF CLOSING. The
closing of the transactions contemplated hereby (the “Closing”) will take place
at the close of business on the date that the Effective Time occurs (or the
immediately preceding day if the Effective Time is earlier than 9:00 A.M.), or
at such other time as the Parties, acting through their authorized officers, may
mutually agree. The Closing shall be held at such location as may be mutually
agreed upon by the Parties or may be conducted by mail or facsimile as may be
mutually agreed upon by the Parties.
1.4 EFFECTIVE
TIME. The
Holding Company Merger and other transactions contemplated by this Agreement
shall become effective on the date and at the time the Articles of Merger
reflecting the Holding Company Merger shall become effective with the Secretary
of State of the State of Florida (the “Effective Time”). Subject to the terms
and conditions hereof, unless otherwise mutually agreed upon in writing by the
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur within 60 days after the last to
occur of (i) the effective date (including expiration of any applicable waiting
period) of the last required Consent of any Regulatory Authority having
authority over and approving or exempting the Mergers, and (ii) the date on
which the shareholders of FABC and CCBG approve this Agreement to the extent
such approval is required by applicable Law. The actual Effective Time within
the 60-day period shall be mutually agreed upon by CCBG and FABC.
1.5 ARTICLES
OF INCORPORATION. The
Articles of Incorporation of CCBG in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation until
duly amended or repealed.
1.6 BYLAWS. The
Bylaws of CCBG in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation until duly amended or repealed.
1.7 DIRECTORS
AND OFFICERS. The
directors of CCBG in office immediately prior to the Effective Time, together
with such persons as may thereafter be elected, shall serve as the directors of
the Surviving Corporation from and after the Effective Time in accordance with
the Bylaws of the Surviving Corporation. The officers of CCBG in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the officers of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation.
ARTICLE
2
MANNER
OF CONVERTING SHARES
2.1 CONVERSION
OF SHARES. Subject
to the provisions of this Article 2, at the Effective Time, by virtue of the
Mergers and without any action on the part of CCBG, CCB, FABC, or First National
or the shareholders of the foregoing, the shares of the constituent corporations
shall be converted as follows:
(a) Each
share of capital stock of CCBG issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding from and after the Effective
Time.
(b) Subject
to adjustment as set forth in this Section 2.1, the aggregate purchase price
(the “Purchase Price”) to be paid by CCBG for the FABC Common Stock shall be
Fifty-Eight Million U.S. Dollars ($58,000,000).
(c) Each
share of FABC Common Stock issued and outstanding immediately prior to the
Effective Time, excluding shares held by any FABC Entity or any CCBG Entity, in
each case other than in a fiduciary capacity or as a result of debts previously
contracted, and excluding shares held by shareholders who perfect their
statutory dissenters’ rights as provided in Section 2.4, shall cease to be
outstanding and, subject to any adjustments as set forth in this Section 2.1,
shall be converted into and exchanged for the right to receive:
(1) that
multiple of a share of CCBG Common Stock equal to the quotient obtained by
dividing (i) one-half of the Adjusted Purchase Price Per Share by (ii) $40 (the
“Share Exchange Ratio”); and
(2) cash
equal to one-half of the Adjusted Purchase Price Per Share.
(d) In the
event that the FABC Audited Financial Statements, pursuant to Section 7.23,
indicate total shareholders’ equity, as that term is defined in accordance with
GAAP, as of September 30, 2004 to be less than $24,665,000, the difference
obtained by subtracting (a) total shareholders’ equity as determined by the
Auditor pursuant to Section 7.23 from (b) $24,665,000 shall be deemed to be
audit adjustments to the FABC Financial Statements (the “Audit
Adjustments”).
(e) If,
pursuant to Section 2.1(d), the opinion of the Auditor with respect to the FABC
Audited Financial Statements shall be qualified and the total capital is not
readily determinable by the Auditor, then the parties agree to negotiate
appropriate Audit Adjustments; provided, that, if the parties cannot agree as to
the amount of such Audit Adjustments within 30 days of the delivery of the
Auditor’s audit opinion, CCBG may terminate this Agreement. In the event that
CCBG elects not to terminate this Agreement, then there shall be no Audit
Adjustments.
(f) Each
share of capital stock of CCB issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding from and after the Effective
Time.
(g) Each
share of capital stock of First National issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding and shall be
extinguished from and after the consummation of the Bank Merger.
2.2 ANTI-DILUTION
PROVISIONS. In the
event CCBG changes the number of shares of CCBG Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Share
Exchange Ratio shall be proportionately adjusted.
2.3 SHARES
HELD BY FABC SHAREHOLDERS OR CCBG. Each of
the shares of FABC Common Stock held by any FABC Entity or any CCBG Entity, in
each case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
2.4 DISSENTING
SHAREHOLDERS. Any
holder of shares of FABC Common Stock who perfects his or her dissenters’ rights
in accordance with and as contemplated by Sections 607.1301-1333 of the FBCA
shall be entitled to receive the value of such shares in cash as determined
pursuant to such provision of Law; provided, that no such payment shall be made
to any dissenting shareholder unless and until such dissenting shareholder has
complied with the applicable provisions of the FBCA and surrendered to FABC the
certificate or certificates representing the shares for which payment is being
made. In the event that after the Effective Time a dissenting shareholder of
FABC fails to perfect, or effectively withdraws or loses, his or her right to
appraisal and of payment for his or her shares subject to CCBG’s consent in its
sole discretion, CCBG shall issue and deliver the consideration to which such
holder of shares of FABC Common Stock is entitled under this Article 2 (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of FABC Common Stock held by him or her.
2.5 FRACTIONAL
SHARES.
Notwithstanding any other provision of this Agreement, each holder of shares of
FABC Common Stock exchanged pursuant to the Mergers who would otherwise have
been entitled to receive a fraction of a share of CCBG Common Stock (after
taking into account all certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of CCBG Common Stock multiplied by the Average Closing Price. No such
holder will be entitled to dividends, voting rights, or any other rights as a
shareholder in respect of any fractional shares.
ARTICLE
3
EXCHANGE
OF SHARES
3.1 EXCHANGE
PROCEDURES.
Promptly after the Effective Time, CCBG and FABC shall cause the exchange agent
selected by CCBG (the “Exchange Agent”) to mail to each holder of record of a
certificate or certificates which represented shares of FABC Common Stock
immediately prior to the Effective Time (the “Certificates”) appropriate
transmittal materials and instructions (which shall specify that delivery shall
be effected, and risk of loss and title to such Certificates shall pass, only
upon proper delivery of such Certificates to the Exchange Agent). The
Certificate or Certificates of FABC Common Stock so delivered shall be duly
endorsed as the Exchange Agent may require. In the event of a transfer of
ownership of shares of FABC Common Stock represented by Certificates that are
not registered in the transfer records of FABC, the consideration provided in
Section 2.1 may be issued to a transferee if the Certificates representing such
shares are delivered to the Exchange Agent, accompanied by all documents
required to evidence such transfer and by evidence satisfactory to the Exchange
Agent that any applicable stock transfer taxes have
been
paid. If any Certificate shall have been lost, stolen, mislaid or destroyed,
upon receipt of (i) an affidavit of that fact from the holder claiming such
Certificate to be lost, mislaid, stolen or destroyed, (ii) such bond, security
or indemnity as CCBG and the Exchange Agent may reasonably require and (iii) any
other documents necessary to evidence and effect the bona fide exchange thereof,
the Exchange Agent shall issue to such holder the consideration into which the
shares represented by such lost, stolen, mislaid or destroyed Certificate shall
have been converted. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of FABC Common
Stock (other than shares to be canceled pursuant to Section 2.3 or as to which
statutory dissenters’ rights have been perfected as provided in Section 2.4)
issued and outstanding at the Effective Time shall surrender the Certificate or
Certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 2.1, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 3.2. To
the extent required by Section 2.5, each holder of shares of FABC Common Stock
issued and outstanding at the Effective Time also shall receive, upon surrender
of the Certificate or Certificates, cash in lieu of any fractional share of CCBG
Common Stock to which such holder may be otherwise entitled (without interest).
CCBG shall not be obligated to deliver the consideration to which any former
holder of FABC Common Stock is entitled as a result of the Mergers until such
holder surrenders such holder’s Certificate or Certificates for exchange as
provided in this Section 3.1. Any other provision of this Agreement
notwithstanding, neither CCBG nor the Exchange Agent shall be liable to a holder
of FABC Common Stock for any amounts paid or property delivered in good faith to
a public official pursuant to any applicable abandoned property, escheat or
similar Law. Adoption of this Agreement by the shareholders of FABC shall
constitute ratification of the appointment of the Exchange Agent.
3.2 RIGHTS
OF FORMER FABC SHAREHOLDERS. At the
Effective Time, the stock transfer books of FABC shall be closed as to holders
of FABC Common Stock immediately prior to the Effective Time and no transfer of
FABC Common Stock by any such holder shall thereafter be made or recognized.
Until surrendered for exchange in accordance with the provisions of Section 3.1,
each Certificate therefor representing shares of FABC Common Stock (other than
shares to be canceled pursuant to Sections 2.3 and 2.4) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 2.1 and 2.5 in exchange therefor, subject,
however, to the Surviving Corporation’s obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which
have been declared or made by FABC in respect of such shares of FABC Common
Stock in accordance with the terms of this Agreement and which remain unpaid at
the Effective Time. Whenever a dividend or other distribution is declared by
CCBG on the CCBG Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all shares of CCBG Common Stock issuable pursuant to this Agreement. No
dividend or other distribution payable to the holders of record of CCBG Common
Stock as of any time subsequent to the Effective Time shall be delivered to the
holder of any Certificate until such holder surrenders such Certificate for
exchange as provided in Section 3.1. However, upon surrender of such
Certificate, both the CCBG Common Stock certificate (together with all such
undelivered dividends or other distributions, without interest) and any
undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented by such
Certificate.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF FABC
FABC and
First National hereby jointly and severally represent and warrant to CCBG as
follows:
4.1 ORGANIZATION,
STANDING, AND POWER.
(a) FABC is a
corporation duly organized, validly existing, and its status is active under the
Laws of the State of Florida, and has the corporate power and authority to carry
on its business as now conducted and to own, lease and operate its Assets. FABC
is duly qualified or licensed to transact business and in good standing in the
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, an FABC Material
Adverse Effect. The minute books and other organizational documents and
corporate records for FABC have been made available to CCBG for its review and,
except as disclosed in Section 4.1 of the FABC Disclosure Memorandum, are true
and complete in all Material respects as in effect as of the date of this
Agreement and accurately reflect in all Material respects all amendments thereto
and all proceedings of the Board of Directors and shareholders
thereof.
(b) First
National is a national bank duly organized, validly existing, and in good
standing under the Laws of the United States of America, and has the corporate
power and authority to carry on its business as now conducted and to own, lease
and operate its Assets. First National is duly qualified or licensed to transact
business and in good standing in the jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, an FABC Material Adverse Effect. The minute books and other
organizational documents and corporate records for First National have been made
available to CCBG for its review and, except as disclosed in Section 4.1 of the
FABC Disclosure Memorandum, are true and complete in all Material respects as in
effect as of the date of this Agreement and accurately reflect in all Material
respects all amendments thereto and all proceedings of the Board of Directors
and shareholders thereof.
4.2 AUTHORITY
OF FABC AND FIRST NATIONAL; NO BREACH BY AGREEMENT.
(a) Each of
FABC and First National has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Mergers, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
FABC and First National, subject to receipt of the requisite Consents referred
to in Section 8.1(b) and the approval of this Agreement by the holders of a
majority of the outstanding shares of FABC Common Stock and a majority of the
outstanding shares of First National Common Stock, which are the only
shareholder votes required for approval of this Agreement and consummation of
the Mergers by FABC and First National. Subject to such requisite shareholder
approval and due authorization, execution and delivery by CCBG, this Agreement
represents a legal, valid, and binding obligation of FABC and First National,
enforceable against FABC and First National in accordance with its terms (except
in all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors’ rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief
is
subject to the discretion of the court before which any such proceeding may be
brought).
(b) Neither
the execution and delivery of this Agreement by FABC and First National, nor the
consummation by FABC and First National of the transactions contemplated hereby,
nor compliance by FABC and First National with any of the provisions hereof,
will (i) conflict with or result in a breach of any provision of FABC’s Articles
of Incorporation or Bylaws or the certificate or articles of incorporation of
any FABC Subsidiary or any resolution adopted by the board of directors or the
shareholders of any FABC Entity, or (ii) subject to receipt of the requisite
Consents referred to in Section 8.1(b), and except as disclosed in Section 4.2
of the FABC Disclosure Memorandum, constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any FABC Entity under, any Contract or Permit of any FABC Entity, where
such Default or Lien, or any failure to obtain such Consent, is reasonably
likely to have, individually or in the aggregate, an FABC Material Adverse
Effect, or where such event would cause a breach hereof or a Default hereunder,
or (iii) subject to receipt of the requisite Consents referred to in Section
8.1(b), constitute or result in a Default under, or require any Consent pursuant
to, any Law or Order applicable to any FABC Entity or their respective Material
Assets (including any CCBG Entity or any FABC Entity becoming subject to or
liable for the payment of any Tax on any of the Assets owned by any CCBG Entity
or any FABC Entity being reassessed or revalued by any taxing
authority).
(c) Except
for the Consents referred to in Section 8.1(b), no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
FABC or First National of the Mergers and the other transactions contemplated in
this Agreement.
4.3 CAPITAL
STOCK.
(a) The
authorized capital stock of FABC consists of (i) 250,000 shares of FABC
Class A Common Stock, of which 4,456 shares are issued and outstanding as of the
date of this Agreement and not more than 4,456 shares will be issued and
outstanding at the Effective Time, (ii) 250,000 shares of FABC Class B Common
Stock, of which 5,730 shares are issued and outstanding as of the date of this
Agreement and not more than 5,730 shares will be issued and outstanding at the
Effective Time, and (iii) no shares of preferred stock are authorized, issued or
outstanding. All of the issued and outstanding shares of FABC Capital Stock are
duly and validly issued and outstanding and are fully paid and nonassessable
under the FBCA. None of the outstanding shares of FABC Capital Stock has been
issued in violation of any preemptive rights of the current or past shareholders
of FABC.
(b) The
authorized capital stock of First National consists of (i) 80,000 shares of
First National Common Stock, of which 80,000 shares are issued and outstanding
as of the date of this Agreement and not more than 80,000 shares will be issued
and outstanding at the Effective Time, and (ii) no shares of preferred stock are
authorized, issued or outstanding. All of the issued and outstanding shares of
First National Capital Stock are duly and validly issued and outstanding and are
fully paid and nonassessable (except for assessment pursuant to 12 U.S.C.
§ 55). None of the outstanding shares of First National Capital Stock has
been issued in violation of any preemptive rights of the current or past
shareholders of First National.
(c) Except as
set forth in Sections 4.3(a) and 4.3(b), or as disclosed in Section 4.3 of the
FABC Disclosure Memorandum, there are no shares of FABC Capital
Stock,
First National Capital Stock or other equity securities of FABC or First
National outstanding and no outstanding Equity Rights relating to FABC Capital
Stock or First National Capital Stock.
4.4 INVESTMENTS;
SUBSIDIARIES. FABC
and First National have disclosed in Section 4.4 of the FABC Disclosure
Memorandum all of the FABC Subsidiaries that are corporations (identifying its
jurisdiction of incorporation, each jurisdiction in which it is qualified and/or
licensed to transact business, and the number of shares owned and percentage
ownership interest represented by such share ownership) and all of the FABC
Subsidiaries that are general or limited partnerships, limited liability
companies, trusts or other non-corporate entities (identifying the Law under
which such entity is organized, each jurisdiction in which it is qualified
and/or licensed to transact business, the type of entity and the amount and
nature of the ownership interest therein). FABC owns all of the issued and
outstanding shares of capital stock (or other equity interests) of each FABC
Subsidiary. No capital stock (or other equity interest) of any FABC Subsidiary
is or may become required to be issued (other than to another FABC Entity) by
reason of any Equity Rights, and there are no Contracts by which any FABC
Subsidiary is bound to issue (other than to another FABC Entity) additional
shares of its capital stock (or other equity interests) or Equity Rights or by
which any FABC Entity is or may be bound to transfer any shares of the capital
stock (or other equity interests) of any FABC Subsidiary (other than to another
FABC Entity). There are no Contracts relating to the rights of any FABC Entity
to vote or to dispose of any shares of the capital stock (or other equity
interests) of any FABC Subsidiary. All of the shares of capital stock (or other
equity interests) of each FABC Subsidiary held by a FABC Entity are fully paid
and (except pursuant to 12 U.S.C. § 55 in the case of national banks and
comparable, applicable state Law, if any, in the case of state depository
institutions) nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are owned
by the FABC Entity free and clear of any Lien. Except as disclosed in Section
4.4 of the FABC Disclosure Memorandum, each FABC Subsidiary is either a bank, a
savings association, or a corporation, and each such Subsidiary is duly
organized, validly existing, and (as to corporations) in good standing or its
status is active, as applicable, under the Laws of the jurisdiction in which it
is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease, and operate its Assets and to carry on its
business as now conducted. Each FABC Subsidiary is duly qualified or licensed to
transact business and in good standing or its status is active, as applicable,
in the jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, an FABC Material
Adverse Effect. Each FABC Subsidiary that is a depository institution is an
“insured institution” as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder, and the deposits are insured by the Bank
Insurance Fund. The minute books and other organizational and corporate
documents for each FABC Subsidiary have been made available to CCBG for its
review, and, except as disclosed in Section 4.4 of the FABC Disclosure
Memorandum, are true and complete in all Material respects as in effect as of
the date of this Agreement and accurately reflect in all Material respects all
amendments thereto and all proceedings of the Board of Directors, all committees
of the Board of Directors and shareholders thereof.
4.5 FINANCIAL
STATEMENTS. To the
Knowledge of FABC and to the Knowledge of First National, each of the FABC
Financial Statements was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or as disclosed in Section 4.5 of the
FABC Disclosure Memorandum), and fairly presents in all Material respects the
financial position of FABC and First National as of the respective dates and the
results
of operations for the periods indicated, except that the interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be Material in amount or
effect.
4.6 ABSENCE
OF UNDISCLOSED LIABILITIES. No FABC
Entity has any Liabilities that are reasonably likely to have, individually or
in the aggregate, an FABC Material Adverse Effect, except Liabilities which are
accrued or reserved against in the balance sheets of FABC and First National as
of December 31, 2003, included in the FABC Financial Statements delivered prior
to the date of this Agreement or reflected in the notes thereto. Except as set
forth in Section 4.6 of the FABC Disclosure Memorandum, no FABC Entity has
incurred or paid any Liability since December 31, 2003, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, an FABC Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement.
4.7 ABSENCE
OF CERTAIN CHANGES OR EVENTS. Since
December 31, 2003, except as disclosed in the FABC Financial Statements
delivered prior to the date of this Agreement or as disclosed in Section 4.7 of
the FABC Disclosure Memorandum, there have been no events, changes, or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, an FABC Material Adverse Effect.
4.8 TAX
MATTERS.
(a) Filing
of Tax Returns. Each
FABC Entity has timely filed with the appropriate taxing authorities all Returns
(including, without limitation, information returns and other Material
information) in respect of Taxes that it is required to file under applicable
Law through the date hereof. All such Returns were, and the information
contained therein was, complete and accurate in all Material respects. Except as
specified in Section 4.8(a) of the FABC Disclosure Memorandum, no FABC Entity
has requested any extension of time within which to file Returns (including,
without limitation, information returns) in respect of any Taxes. FABC and First
National have made available to CCBG copies of such portions of the federal,
state, foreign and local income tax returns of each FABC Entity for the last
four years that relate to such FABC Entity. Except as set forth in Section
4.8(a) of the FABC Disclosure Memorandum, no FABC Entity has derived income from
or operated a trade or business in any foreign country, state or
locality.
(b) Payment
of Taxes. All
Taxes in respect of periods beginning before the date hereof (i) if due and
payable, have been timely paid, (ii) if not yet due and payable, have an
adequate reserve established therefor in accordance with FABC management’s
estimate of the taxes owed and in accordance with GAAP as of the Closing Date or
(iii) are being contested in good faith by an FABC Entity pursuant to
appropriate proceedings which are being diligently pursued and an adequate
reserve therefor has been established in accordance with GAAP, as set forth in
Section 4.8(b) of the FABC Disclosure Memorandum. No FABC Entity has any
Material Liability for Taxes in excess of the amounts so paid or reserves so
established in accordance with (b)(i) or (b)(ii) above. Each FABC Entity has,
within the time and manner prescribed by applicable Law, rules and regulations,
withheld and paid over to the proper taxing or other governmental authorities
all Taxes required to be withheld and paid over. Except (i) acts, events or
omissions that are ordinary business activities, (ii) to the extent relating to
income an FABC Entity receives after the Closing, or (iii) as set forth in
Section 4.8(b) of the FABC Disclosure Memorandum, to the Knowledge of FABC, no
acts, events or omissions have occurred on or before the Closing Date that would
result in Material Taxes for which any FABC Entity is or may become liable that
will apply in a period or a portion thereof beginning on or after the Closing
Date.
(c) Audit
History. Except
as set forth in Section 4.8(c) of the FABC Disclosure Memorandum, there are no
deficiencies for Taxes claimed, proposed or assessed that have not yet been
fully and finally resolved and, if such resolution required payment of any
Taxes, such payment has been made. Except as set forth in Section 4.8(c) of the
FABC Disclosure Memorandum, there are no pending or, to FABC’s Knowledge or to
First National’s Knowledge, threatened audits, investigations or claims for or
relating to Taxes, and there are no matters under discussion with any taxing or
other governmental authority with respect to Taxes, in each case, that, in the
reasonable judgment of FABC and First National or their respective tax advisers,
are likely to result in a Material additional amount of Taxes. Audits of
federal, state, foreign and local returns for Taxes of any FABC Entity by the
relevant taxing authorities within the past 5 years have been completed for each
period set forth in Section 4.8(c) of the FABC Disclosure Memorandum. Except as
set forth in Section 4.8(c) of the FABC Disclosure Memorandum, no extension of a
statute of limitations relating to Taxes is in effect with respect to any FABC
Entity.
(d) Tax
Elections.
(1) All
Material elections with respect to Taxes affecting any FABC Entity that are
effective as of the date hereof are set forth in Section 4.8(d) of the FABC
Disclosure Memorandum.
(2) No FABC
Entity: (i) has agreed, or is required, to make any adjustment under
§ 481(a) of the Code that would be applicable to any taxable period ending
after the Closing Date by reason of a change in accounting method or otherwise;
(ii) has made an election or is required, to treat any Asset of any FABC Entity
as owned by another person pursuant to the provisions of § 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before
enactment of the Tax Reform Act of 1986, (iii) owns tax-exempt bond financed
property within the meaning of § 168(g) of the Code, or (iv) owns tax-exempt use
property within the meaning of § 168(h)(1) of the Code.
(e) Asset
Liens. There
are no Liens for Taxes (other than for current Taxes not yet due and payable) on
any Assets of any FABC Entity.
(f) Tax
Rulings/Binding Agreement. No FABC
Entity has requested or received any ruling from any taxing authority, or signed
any binding agreement with any taxing authority (including, without limitation,
any advance pricing agreement), that would materially adversely affect the
amount of Taxes after the Closing Date.
(g) Power
of Attorney. Except
as set forth in Section 4.8(g) of the FABC Disclosure Memorandum, there is no
power of attorney currently in force granted by any FABC Entity relating to
Taxes.
(h) Prior
Affiliated Groups. Section
4.8(h) of the FABC Disclosure Memorandum lists all combined consolidated or
unitary groups (other than the consolidated or unitary group of which FABC is
the parent) of which each FABC Entity has been a member and which has filed a
combined, consolidated or unitary return for federal, state, local or foreign
tax purposes.
(i) Tax-Sharing
Agreements. Except
as set forth in Section 4.8(i) of the FABC Disclosure Memorandum, no FABC Entity
is a party to a tax-sharing agreement or any similar arrangement.
(j) Existing
Partnerships and Single Member LLCs. Except
as set forth in Section 4.8(j) of the FABC Disclosure Memorandum, no FABC Entity
(i) is subject to
any joint
venture, partnership or other agreement or arrangement which is treated as a
partnership for federal income tax purposes, or (ii) owns a single member
limited liability company which is treated as a disregarded entity.
(k) Parachute
Payments. Except
as set forth in Section 4.8(k) of the FABC Disclosure Memorandum, no FABC Entity
has made or become obligated to make, or will, as a result of any event
connected with the merger of FABC with CCBG or any other transaction
contemplated herein, make or become obligated to make, any “excess parachute
payment” as defined in § 280G of the Code.
(l) Balance
of Intercompany Items. Except
as set forth in Section 4.8(l) of the FABC Disclosure Memorandum, all items of
income, gain, deduction or loss from an intercompany transaction will be taken
into account as of the Closing Date under the matching and acceleration rules of
Treas. Reg. § 1.1502-13.
(m) Debt
or Stock of Acquiring Group. No FABC
Entity owns any debt obligation of a CCBG Entity or any CCBG Capital
Stock.
(n) Compliance
with § 6038A. Each
FABC Entity has complied with all applicable reporting and record-keeping
requirements under § 6038A of the Code with respect to certain foreign-owned
companies and transactions with certain related parties.
(o) FIRPTA. No FABC
Entity is a “foreign person” as defined in § 1445(f)(3) of the
Code.
(p) Permanent
Establishment. No FABC
Entity has, or has had, a permanent establishment in any foreign country, as
defined in any applicable tax treaty or convention between the United States of
America and any such foreign country.
(q) Security
for Tax-Exempt Obligations. None of
the Assets of any FABC Entity directly or indirectly secures any debt, the
interest on which is tax-exempt under § 103(a) of the Code.
(r) U.S.
Real Property Holding Corporation. No FABC
Entity is, or has been, a United States real property holding corporation (as
defined in § 897(c)(2) of the Code) during the applicable period specified in §
897(c)(1)(A)(ii) of the Code.
(s) Unpaid
Tax. The
unpaid Taxes of each FABC Entity do not exceed the reserve for Taxes based upon
FABC management’s estimates of the Taxes owed (excluding any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth or included in the most recent FABC Financial Statements as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of FABC.
(t) Tax
Ownership. Each
Asset with respect to which an FABC Entity claims depreciation, amortization or
similar expense for Tax purposes is owned for Tax purposes by such FABC
Entity.
(u) Timing
Differences. No item
of income or gain reported by any FABC Entity for financial accounting purposes
in any pre-Closing period is required to be included in taxable income for a
post-Closing period except to the extent that a reserve has been established on
the books and financial statements of FABC to reflect timing differences between
book and Tax income.
4.9 ALLOWANCE
FOR POSSIBLE LOAN LOSSES. In the
opinion of FABC management and First National management, the allowances for
possible loan and lease credit losses (collectively, the “Allowance”) shown on
the FABC Financial Statements immediately prior to the Effective Time will be,
as of the date thereof, adequate (within the meaning of GAAP and applicable
regulatory requirements or guidelines) to provide for all known or reasonably
anticipated losses relating to or inherent in the loan and lease portfolio of
the FABC Entities and other extensions of credit (including letters of credit)
by the FABC Entities as of the dates thereof.
4.10 ASSETS.
(a) Except as
disclosed in Section 4.10 of the FABC Disclosure Memorandum or as disclosed or
reserved against in the FABC Financial Statements delivered prior to the date of
this Agreement, each FABC Entity has good, marketable, and insurable title, free
and clear of all Liens, to all of its Assets. All Material tangible properties
used in the businesses of each FABC Entity are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with such FABC Entity’s past practices.
(b) All
Assets which are Material to the business of either FABC or First National, held
under leases or subleases by any FABC Entity, are held under valid Contracts
enforceable by an FABC Entity and to the Knowledge of FABC or to the Knowledge
of First National, as to the counterparty to such Contracts in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors’ rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any such proceeding may be brought),
there are no Material Defaults under such Contracts and no event(s) has
occurred, which with the giving of notice or passage of time would cause such a
Material Default to occur, and each such Contract is in full force and effect.
Furthermore, none of the FABC Entities has received any notice that any FABC
Entity is in, or will be in, Material Default under such Contracts.
(c) Each FABC
Entity currently maintains insurance in amounts, scope, and coverage reasonably
adequate to operate its business as presently conducted. None of the FABC
Entities has received notice from any insurance carrier that (i) any policy of
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no claims for amounts
exceeding in any individual case $10,000, or in the aggregate $50,000, pending
under such policies of insurance and no notices of claims in excess of such
amounts have been given by FABC under such policies.
(d) The
Assets of each FABC Entity include all Assets required to operate the business
of the FABC Entities as presently conducted.
(e) Except as
disclosed in Section 4.10(e) of the FABC Disclosure Memorandum, neither FABC nor
any FABC Subsidiary holds any deposits or has made any loans to any individuals
or related group of individuals which (i) in the case of deposits,
individually or in the aggregate exceed $8 million, or (ii) in the case of
loans, individually or in the aggregate exceed $3.5 million.
(f) There are
no leases, subleases, licenses, concessions, or other agreements, written or
oral, granting to any party or parties the right of use or occupancy of any real
property owned or leased by any FABC Entity, including FABC’s
and First
National’s banking facilities and all other real estate or foreclosed properties
and any improvements thereon (collectively, the “Real Property”), except as set
forth in Section 4.10(f) of the FABC Disclosure Memorandum.
(g) Except as
set forth in Section 4.10(g) of the FABC Disclosure Memorandum, there are no
outstanding contracts for sale, options or rights of first refusal to purchase
any Real Property or any portion thereof or interest therein.
(h) There are
no parties (other than any FABC Entities) in possession of any Real Property,
other than tenants under any leases disclosed in Section 4.10(h) of the FABC
Disclosure Memorandum who are in possession of space to which they are
entitled.
(i) Each real
property owned or leased by any FABC Entities and which is used in the ordinary
course of FABC’s or First National’s banking business is supplied with utilities
and other services necessary for the operation of such facilities, including
gas, electricity, water, telephone, sanitary sewer, and storm sewer, all of
which services are adequate and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefiting such property.
(j) Except as
set forth in the FABC Disclosure Memorandum, each real property owned or leased
by FABC or First National and which is used in the ordinary course of FABC’s or
First National’s banking business has direct vehicular access to a public road,
or has access to a public road via permanent, irrevocable, appurtenant easements
benefiting the parcel of real property.
4.11 INTELLECTUAL
PROPERTY. Except
as set forth in Section 4.11 of the FABC Disclosure Memorandum, each FABC Entity
owns or has a license to use all of the Intellectual Property used by such FABC
Entity in the course of its business. Each FABC Entity is the owner of or has a
license to any Intellectual Property sold or licensed to a third party by such
FABC Entity in connection with such FABC Entity’s business operations, and such
FABC Entity has the right to convey by sale or license any Intellectual Property
so conveyed. Except as set forth in Section 4.11 of the FABC Disclosure
Memorandum, no FABC Entity is in Default under any of its Intellectual Property
licenses. No proceedings have been instituted, or are pending or to the
Knowledge of FABC threatened, which challenge the rights of any FABC Entity with
respect to Intellectual Property used, sold or licensed by such FABC Entity in
the course of its business, nor has any person claimed or alleged any rights to
such Intellectual Property. To the Knowledge of FABC, the conduct of the
business of any FABC Entity does not infringe any Intellectual Property of any
other person. Except as disclosed in Section 4.11 of the FABC Disclosure
Memorandum, no FABC Entity is obligated to pay any recurring royalties to any
Person with respect to any such Intellectual Property. Except as disclosed in
Section 4.11 of the FABC Disclosure Memorandum, every officer, director, or
employee of any FABC Entity is a party to a Contract which requires such
officer, director or employee to assign any interest in any Intellectual
Property to an FABC Entity and to keep confidential any trade secrets,
proprietary data, customer information, or other business information of any
FABC Entity, and to the Knowledge of FABC or to the Knowledge of First National,
no such officer, director or employee is party to any Contract with any Person
other than any FABC Entity which requires such officer, director or employee to
assign any interest in any Intellectual Property to any Person other than FABC
or to keep confidential any trade secrets, proprietary data, customer
information, or other business information of any Person other than any FABC
Entity. Except as disclosed in Section 4.11 of the FABC Disclosure Memorandum,
no officer, director or, to the Knowledge of FABC or to the Knowledge of First
National, any employee of any FABC Entity is party to any Contract which
restricts or prohibits such officer, director
or
employee from engaging in activities competitive with any Person, including any
FABC Entity.
4.12 ENVIRONMENTAL
MATTERS.
(a) Except as
disclosed in Section 4.12(a) of the
FABC Disclosure Memorandum, each FABC Entity, its Operating
Properties and its
Participation
Facilities are and
have been in compliance with all Environmental Laws, except for violations which
are not reasonably likely to have, individually or in the aggregate, an FABC
Material Adverse Effect.
(b) Except as
disclosed in Section 4.12(b)
of the FABC Disclosure Memorandum, there has not occurred, nor is there
presently occurring, nor is there any basis for the occurrence of, any emission,
release, discharge, spill, or disposal, or any threatened emission, release,
discharge, spill, or disposal, of any Hazardous Material at, in, on, upon,
about, into, beneath, adjacent to, or affecting (or potentially affecting) any
respective current or former properties of any FABC Entity, or that of any of
its Operating Properties or its
Participation Facilities, that
was caused by, contributed to, exacerbated by, or otherwise affected or
adversely affected by (or potentially affected or adversely affected by), the
acts or omissions of an FABC Entity or any of its Operating
Properties or, to
the Knowledge of FABC, its
Participation Facilities,
including, but not limited to, (i) in an amount requiring, or reasonably
requiring, a notice, notification, or report to be made to a governmental agency
or authority pursuant to Environmental Laws or (ii) in violation or
noncompliance, or alleged violation or noncompliance, of Environmental
Laws.
(c) Except as
disclosed in Section 4.12(c)
of the FABC Disclosure Memorandum, each FABC Entity, its Operating
Properties and its
Participation
Facilities have
not, at any time, generated, manufactured, processed, distributed, treated,
stored, transported, used or handled or disposed of or arranged for the disposal
of Hazardous Material at or
upon: (i) any location other than a site lawfully permitted to receive such
Hazardous Material or (ii) any site which, pursuant to any Environmental Laws,
(x) has been placed on the National Priorities List or on its state equivalent
or analog or on any other list of hazardous waste sites maintained by a
governmental agency or authority, or (y) the United States Environmental
Protection Agency or the relevant state agency or other governmental agency or
authority has notified any FABC Entity or any of its Participation Facilities or
Operating Properties that such governmental agency or authority has proposed or
is proposing to place such site on the National Priorities List or on its state
equivalent or analog or on any other list of hazardous waste sites maintained by
a governmental agency or authority, nor is there any basis for the
above.
(d) Except as
disclosed in Section 4.12(d) of the
FABC Disclosure Memorandum, there is no Litigation pending, or to the Knowledge
of FABC and First National, threatened to occur, before any court, governmental
agency or authority, or any other forum, in which any FABC Entity or any of its
Operating Properties or, to the
Knowledge of FABC, its
Participation Facilities, has been
or, with respect to threatened Litigation, may be named as a defendant or
respondent (i) for violation or noncompliance, or alleged violation or
noncompliance, with any Environmental Laws or (ii) relating to the emission,
release, discharge, spill, or disposal or threatened emission, release,
discharge, spill, or disposal of any Hazardous Material at, in, on, upon, about,
into, beneath, adjacent to, or affecting (or potentially affecting) the
environment, whether or not occurring at, in, on, into, upon, beneath, about,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated
by any FABC Entity or any of its Operating Properties or Participation
Facilities.
(e) Except as
disclosed in Section 4.12(e) of the
FABC Disclosure Memorandum, there are no non-compliance orders, warning letters,
or notices of violation (collectively, “Notices”) pending, nor to the Knowledge
of FABC and First National is there a basis for any Notices, before any court,
governmental agency or authority, or any other forum, in which any FABC Entity
or any of its Operating Properties or, to the Knowledge of FABC, its
Participation Facilities, has
been or, with respect to threatened Notices, may be named as a defendant or
respondent (i) for violation or noncompliance, or alleged violation or
noncompliance, with any Environmental Laws, or (ii) relating to the emission,
release, discharge, spill, or disposal or threatened emission, release,
discharge, spill, or disposal of any Hazardous Material at, in, on, upon, about,
into, beneath, adjacent to, or affecting (or potentially affecting) a site
owned, leased, or operated by any FABC Entity or any of its Operating Properties
or Participation Facilities.
4.13 COMPLIANCE
WITH LAWS. FABC is
duly registered as a bank holding company under the BHC Act. Each FABC Entity
has in effect all Permits necessary for it to own, lease, or operate its
Material Assets and to carry on its business as now conducted, except for those
Permits the absence of which are not reasonably likely to have, individually or
in the aggregate, an FABC Material Adverse Effect, and there has occurred no
Default under any such Permit, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, an FABC Material Adverse
Effect. Except as disclosed in Section 4.13 of the FABC Disclosure Memorandum,
none of the FABC Entities:
(a) is in
Default under or violation of any of the provisions of its Articles of
Incorporation or Bylaws (or other governing instruments);
(b) is in
Default under any Laws, Orders, or Permits applicable to its business or
employees conducting its business, except for Defaults which are not reasonably
likely to have, individually or in the aggregate, an FABC Material Adverse
Effect; or
(c) since
January 1, 2001, has received any notification or communication from any
agency or department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any FABC Entity is not in
compliance with any of the Laws or Orders which such governmental authority or
Regulatory Authority enforces, (ii) threatening to revoke any Permits, or (iii)
requiring any FABC Entity to enter into or Consent to the issuance of a cease
and desist order, formal agreement, directive, commitment, or memorandum of
understanding, or to adopt any Board resolution or similar undertaking, which
restricts the conduct of its business or in any manner relates to its capital
adequacy, its credit or reserve policies, its management, or the payment of
dividends.
Copies of
all Material reports, correspondence, notices and other documents relating to
any inspection, audit, monitoring or other form of review or enforcement action
by a Regulatory Authority have been made available to CCBG.
4.14 LABOR
RELATIONS. No FABC
Entity is the subject of any Litigation asserting that it or any other FABC
Entity has committed an unfair labor practice (within the meaning of the
National Labor Relations Act or comparable state law) or seeking to compel it or
any other FABC Entity to bargain with any labor organization as to wages or
conditions of employment, nor is any FABC Entity party to any
collective
bargaining agreement, nor is there any strike or other labor dispute involving
any FABC Entity, pending or threatened, or to the Knowledge of FABC or to the
Knowledge of First National is there any activity involving any FABC Entity’s
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
4.15 EMPLOYEE
BENEFIT PLANS.
(a) FABC and
First National have listed in Section 4.15 of the FABC Disclosure Memorandum,
and, in addition thereto, have delivered or made available to CCBG prior to the
execution of this Agreement copies (and will continue to make same available to
CCBG after execution and prior to Closing, where necessary) of any and all
pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plan, all other written employee programs, arrangements, or agreements,
including any employment agreement which may itself contain such provisions, all
payroll practices, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including “employee benefit plans” as that term is defined in Section 3(3) of
ERISA (generally referred to as “Benefit Plans”), currently adopted, maintained
by, participated in, sponsored in whole or in part by, or contributed to by FABC
or ERISA Affiliate (as defined below) thereof for the benefit of FABC’s or any
ERISA Affiliate’s employees, retirees, dependents, spouses, directors,
independent contractors, or any other beneficiaries (collectively
“Participants”) under which such Participants are eligible to participate or
receive benefits (collectively, the “FABC Benefit Plans”). The FABC
Benefit Plans documents delivered or made available to CCBG by FABC include true
and
complete copies of each plan, together with any amendments thereto, any trust
agreements associated with an FABC
Benefit Plan,
together with any amendments thereto, any insurance or annuity contracts with
respect to any FABC
Benefit Plan, all
corporate resolutions with respect to any FABC Benefit Plan, all summary plan
descriptions with respect to any FABC
Benefit Plan together
with any amendments thereto, all Internal Revenue Service (“IRS”) Forms 5500 (or
variations thereof) together with any Schedule B and any other attachment
thereto filed with respect to any FABC
Benefit Plan (for
each of the three most recent plan years), all certified actuarial statements
(for each of the three most recent plan years) with respect to any FABC
Benefit Plan, any
auditor’s reports (for each of the three most recent plan years) with respect to
any FABC
Benefit Plan, all
agreements or Contracts entered into with any third party administrator or
trustee with respect to any FABC
Benefit Plan, and all
agreements or contracts with any investment manager, investment advisor or third
party administrator with respect to any FABC
Benefit Plan. FABC
will further provide CCBG with a list of each pension consultant, actuary,
attorney, and accountant providing professional services with respect to any
FABC
Benefit Plan or the
fiduciaries of any FABC
Benefit Plan, as well
as the location of all other records and the name of the individual responsible
for such records with respect to any FABC
Benefit Plan. Any of
the FABC Benefit Plans which is an “employee pension benefit plan,” as that term
is defined in Section 3(2) of ERISA, is referred to herein as a “FABC ERISA
Plan.” Each FABC ERISA Plan that is also a “defined benefit plan” (as defined in
Section 414(j) of the Code) is referred to herein as a “FABC Pension Plan.” No
FABC Pension Plan is or has been a multiemployer plan within the meaning of
Section 3(37) of ERISA.
(b) Except as
otherwise provided for in this Agreement or disclosed in Section 4.15(b) of the
FABC Disclosure Memorandum, FABC, First National, their agents, the trustees and
other fiduciaries of the FABC Benefit Plans have, at all times, complied in all
Material respects in the aggregate with the applicable provisions of the FABC
Benefit Plans, the Code and ERISA, including, but not limited to, COBRA, HIPAA
(as those terms are defined below) and any applicable, similar state
law, and
with all agreements relating to the administration of such FABC Benefit Plans.
Except as otherwise provided for or disclosed elsewhere in this Agreement, each
FABC Benefit Plan has been administered and communicated to the Participants and
beneficiaries in accordance with its provisions, and all required annual
reports, filings, disclosures, or other communications, which have been required
to be made to the Participants and beneficiaries, other employees, the IRS, the
U.S. Department of Labor, or any other applicable governmental agency, in
connection with each FABC Benefit Plan, pursuant to the Code, ERISA, or other
applicable statute or regulation, have been made in a timely manner and no
Liability has been incurred on account of delinquent or incomplete compliance or
failure to comply with such requirements. All amendments and actions required to
bring the FABC ERISA Plans into conformity in all Material respects with all of
the applicable provisions of ERISA and other applicable Laws have been made or
taken. Any bonding required with respect to any FABC Benefit Plan in accordance
with applicable provisions of ERISA has been obtained and is in full force and
effect. Each FABC ERISA Plan, which is intended to be qualified under Section
401(a) of the Code has heretofore received a favorable determination letter from
the IRS, and neither FABC nor any ERISA Affiliate is aware of any circumstances
likely to result in revocation of any such favorable determination letter(s);
provided, however, that if such FABC ERISA Plan is in the form of a master plan,
a prototype plan or a volume submitter plan, then the term “determination
letter” includes a favorable opinion or advisory letter issued by the IRS to the
submitter practitioner covering the underlying master plan, prototype plan or
volume submitter plan, provided the requirements of Announcement 2001-77 (or its
successors) are satisfied, which permit FABC and First National to rely on the
determination letter issued to the submitter practitioner of such master plan, a
prototype plan or a volume submitter plan.
(c) Except as
disclosed in Section 4.15 of the FABC Disclosure Memorandum:
(1) There are
no actions, suits, investigations, arbitrations, proceedings, or adverse
Participant claims pending against any FABC Benefit Plan, against the Assets of
any of the trusts under such plans or the plan sponsor or the plan
administrator, or, to the Knowledge of FABC and its Affiliates, against any
agent or fiduciary of any FABC Benefit Plan with respect to the operation of
such plans (other than routine benefit claims);
(2) Neither
FABC nor any ERISA Affiliate or any disqualified person (as defined in Section
4975 of the Code) have engaged in a transaction with respect to any FABC Benefit
Plan that, assuming the taxable period of such transaction expired as of the
date hereof, would subject FABC, First National, their agents, the trustees or
the other fiduciaries of the FABC Benefit Plans to a Tax
imposed by either Section 4975 of the Code or any penalty under Section 502(i)
of ERISA;
(3) There
have been no governmental audits of any FABC Benefit Plan within the last six
(6) years that have resulted in any penalties, fines, excise taxes, additional
benefit accruals, and to the Knowledge of FABC and its Affiliates, there are no
threatened or pending governmental audits as of the date hereof and as of the
date of Closing; and
(4) No FABC
Entity will issue any stock, stock options or amend or terminate any FABC
Benefit Plan subsequent to the date of this Agreement without the written
consent of CCBG except as may be necessary to honor any pre-existing contract or
to maintain the qualification of such FABC Benefit Plan, in which
case
FABC
shall promptly notify CCBG of such issuance, amendment or termination in writing
prior to its implementation.
(d) No FABC
Pension Plan has any “unfunded current liability,” as that term is defined in
Section 302(d)(8)(A) of ERISA, based on actuarial assumptions used for ongoing
funding purposes, as set forth for such plan’s most recent actuarial valuation
or upon termination of such plan and payment of accrued benefits using terminal
funding annuities to satisfy accrued benefit obligations. Since the date of the
most recent actuarial valuation, there has been (i) no Material change in the
financial position of any FABC Pension Plan, (ii) no change in the actuarial
assumptions with respect to any FABC Pension Plan, and (iii) no increase in
benefits under any FABC ERISA Plan as a result of plan amendments or changes in
applicable Law. Neither any FABC Pension Plan nor any “single-employer plan,”
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by FABC, or the single-employer plan of any entity which is
considered one employer with FABC under Section 4001 of ERISA or Section 414 of
the Code or Section 302 of ERISA (whether or not waived) (an “ERISA Affiliate”)
has an “accumulated funding deficiency” within the meaning of Section 412 of the
Code or Section 302 of ERISA. Neither FABC nor any ERISA Affiliate has any
outstanding Liability under Section 4971 of the Code. FABC has not provided, nor
is it required to provide, security to an FABC Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code.
(e) Within
the six-year period preceding the Effective Time, no Liability to the Pension
Benefit Guaranty Corporation (“PBGC”) under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by any FABC Entity with respect to any
ongoing, frozen, or terminated single-employer plan or the single-employer plan
of FABC or an ERISA Affiliate. Neither FABC nor any ERISA Affiliate has incurred
any withdrawal Liability with respect to a multiemployer plan under Subtitle B
of Title IV of ERISA (regardless of whether based on contributions of an ERISA
Affiliate). No notice of a “reportable event,” within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any FABC Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof. All premiums due
the PBGC with respect to any FABC
Pension Plan have been
paid.
(f) Except as
disclosed in Section 4.15 of the FABC Disclosure Memorandum, neither FABC nor
any ERISA Affiliate has any Liability for retiree health and life benefits under
any of the FABC Benefit Plans and if there are any such plans, there are no
restrictions on the rights of FABC or on any ERISA Affiliate to amend or
terminate any such retiree health or benefit Plan without incurring any
post-termination Liability thereunder (except for administrative costs and
professional fees to terminate same).
(g) Except as
provided for in this Agreement or as disclosed in Section 4.15 of the FABC
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute,
change of control, or otherwise) becoming due to any director or any employee of
any FABC Entity under any FABC Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any FABC Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(h) Except as
disclosed in Section 4.15 of the FABC Disclosure Memorandum, the actuarial
present values of all accrued deferred compensation entitlements (including
entitlements under any executive compensation, supplemental
retirement,
or employment agreement) of employees and former employees of any FABC Entity
and respective beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Sections 401(a) and/or 412 of the
Code or Section 302 of ERISA, have been fully reflected on the FABC Financial
Statements to the extent required by and in accordance with GAAP.
(i) No
Liability under any FABC Pension Plan has been funded or satisfied with the
purchase of a contract from an insurance company that is not rated
“A(Excellent)” or better by A.M. Best Company, Inc.
(j) Except as
disclosed in Section 4.15 of the FABC Disclosure Memorandum, no stock or other
security issued by any FABC Entity forms or has formed a part of the Assets of
any FABC Benefit Plan.
(k) To the
Knowledge of FABC or to the Knowledge of First National, neither FABC, First
National, any FABC Benefit Plan nor any employee, administrator or agent
thereof, is or has been in violation of the transaction code set rules enacted
by HIPAA and codified at 42 U.S.C. §§ 1320d-1 to 1320d-3 or the HIPAA
privacy rules under 45 C.F.R. Part 160 and subparts A and E of Part 164. No
penalties have been imposed on FABC, First National, any FABC Benefit Plan, or
any employee, administrator or agent thereof, under 42 U.S.C. § 1320d-5 or §
1320d-6 as enacted by HIPAA. For purposes of this Agreement, “COBRA” means the
provision of Section 4980B of the Code and the regulations thereunder, and Part
6 of Subtitle B of Title I of ERISA and any regulations thereunder. “HIPAA”
means provisions of the Code, ERISA, and Social Security Act as enacted by the
Health Insurance Portability and Accountability Act of 1996, and any regulations
thereunder.
4.16 MATERIAL
CONTRACTS. Except
as disclosed in Section 4.16 of the FABC Disclosure Memorandum or otherwise
reflected in the FABC Financial Statements, none of the FABC Entities, nor any
of their Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $25,000, (ii) any Contract
relating to the borrowing of money by any FABC Entity or the guarantee by any
FABC Entity of any such obligation (other than Contracts evidencing deposit
liabilities, purchases of federal funds, fully-secured repurchase agreements,
and Federal Home Loan Bank advances of depository institution Subsidiaries,
trade payables and Contracts relating to borrowings or guarantees made in the
ordinary course of business), (iii) any Contract which prohibits or restricts
any FABC Entity from engaging in any business activities in any geographic area,
line of business or otherwise in competition with any other Person, (iv) any
Contract between or among FABC Entities, (v) any Contract involving Intellectual
Property (other than Contracts entered into in the ordinary course with
customers and commercial “shrink-wrap” software licenses), (vi) any Contract
relating to the provision of data processing, network communication, or other
technical services to or by any FABC Entity, (vii) any Contract relating to the
purchase or sale of any goods or services (other than Contracts entered into in
the ordinary course of business and involving payments under any individual
Contract of less than $25,000), (viii) any exchange-traded or over-the-counter
swap, forward, future, option, cap, floor, or collar financial Contract, or any
other interest rate or foreign currency protection Contract not included on its
balance sheet which is a financial derivative Contract, and (ix) any other
Contract or amendment thereto that would be required to be filed with any
relevant Regulatory Authority as of the date of this Agreement (together with
all Contracts referred to in Sections 4.10 and 4.15(a), the “FABC Contracts”).
With respect to each FABC Contract and except as disclosed in Section 4.16 of
the FABC Disclosure Memorandum: (i) the Contract is in full force and effect;
(ii) no FABC
Entity is
in Default thereunder in any Material respect or would be in Default thereunder
in any Material respect as a result of this Agreement or the transaction
contemplated herein; (iii) no FABC Entity has repudiated or waived any Material
provision of any such Contract; and (iv) no other party to any such Contract is,
to the Knowledge of FABC or to the Knowledge of First National, in Default in
any respect or has repudiated or waived any Material provision thereunder.
Except as disclosed in Section 4.16 of the FABC Disclosure Memorandum, all of
the indebtedness of any FABC Entity for money borrowed is prepayable at any time
by such FABC Entity without penalty or premium and no FABC Entity has any
obligation or Liability to any wholesale mortgage business or to any Affiliate
of such Persons to purchase, fund or extend credit with respect to any loans,
extensions of credit, mortgages, or any participation or other interest therein
originated, brokered or referred by or through such Persons. Except as described
in Section 4.16 of the FABC Disclosure Memorandum, all Contracts to which any
FABC Entity is a party may be terminated by such FABC Entity and its successors
and assigns without penalty, charge, liability or further
obligation.
4.17 LEGAL
PROCEEDINGS. There
is no Litigation instituted or pending, or, to the Knowledge of FABC or to the
Knowledge of First National, threatened (or unasserted but considered probable
of assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any FABC Entity or any FABC Benefit Plan, or
against any director or employee of any FABC Entity, in their capacity as such,
or against any Asset, interest, or right of any of them, nor are there any
Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any FABC Entity. Section 4.17 of the FABC
Disclosure Memorandum contains a summary of all Litigation as of the date of
this Agreement to which any FABC Entity is a party and which names any FABC
Entity as a defendant or cross-defendant or for which any FABC Entity has any
potential Liability.
4.18 REPORTS. Except
as set forth in Section 4.18 of the FABC Disclosure Memorandum, since January 1,
2001, or the date of organization if later, each FABC Entity has timely filed
all reports and statements, together with any amendments required to be made
with respect thereto, that it was required to file with Regulatory Authorities.
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits and schedules thereto, complied in all Material
respects with all applicable Laws. As of its respective date, each such report
and document did not contain any untrue statement of a Material fact or omit to
state a Material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
4.19 STATEMENTS
TRUE AND CORRECT. No
statement, certificate, instrument, or other writing furnished or to be
furnished by any FABC Entity or any Affiliate thereof to CCBG pursuant to this
Agreement or any other document, agreement, or instrument referred to herein
contains or will contain any untrue statement of Material fact or will omit to
state a Material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any FABC Entity or any Affiliate
thereof for inclusion in the Registration Statement to be filed by CCBG with the
SEC will, when the Registration Statement becomes effective, be false or
misleading with respect to any Material fact, or omit to state any Material fact
necessary to make the statements therein not misleading. None of the information
supplied or to be supplied by any FABC Entity or any Affiliate thereof for
inclusion in the Proxy Statement to be mailed to FABC shareholders in connection
with the Shareholders’ Meeting, and none of the information contained in any
other documents to be filed by any FABC Entity or any Affiliate thereof with the
SEC or any other
Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective times such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of FABC, be false or misleading
with respect to any Material fact, or omit to state any Material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Shareholders’
Meeting, be false or misleading with respect to any Material fact, or omit to
state any Material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders’ Meeting. All documents that any FABC Entity or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all Material
respects with the provisions of applicable Law.
4.20 ACCOUNTING,
TAX, AND REGULATORY MATTERS. No FABC
Entity or any Affiliate thereof has taken or agreed to take any action or has
any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the Mergers from qualifying as a reorganization within the meaning of
Section 368(a) of the Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 8.1(b) or result in
the imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
4.21 STATE
TAKEOVER LAWS. Each
FABC Entity has taken all necessary action to exempt the transactions
contemplated by this Agreement from, or if necessary to challenge the validity
or applicability of, any applicable “moratorium,” “fair price,” “business
combination,” “control share,” or other anti-takeover Laws (collectively,
“Takeover Laws”), including Sections 607.0901 and 607.0902 of the
FBCA.
4.22 CHARTER
PROVISIONS. Each
FABC Entity has taken all action so that the entering into of this Agreement and
the consummation of the Mergers and the other transactions contemplated by this
Agreement do not and will not result in the grant of any rights to any Person
under the Articles of Incorporation, Bylaws or other governing instruments of
any FABC Entity or restrict or impair the ability of CCBG or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with
respect to, shares of any FABC Entity that may be directly or indirectly
acquired or controlled by them. This Agreement and the transactions contemplated
herein will not trigger any supermajority voting provisions under the Articles
of Incorporation, Bylaws, or other governing instruments of any FABC
Entity.
4.23 OPINION
OF FINANCIAL ADVISOR. FABC
has received the opinion of SunTrust Robinson Humphrey, dated the date that the
FABC Board of Directors approved this Agreement, to the effect that the
consideration to be received in the Mergers by the holders of FABC Common Stock
is fair, from a financial point of view, to such holders, a signed copy of which
has been delivered to CCBG.
4.24 BOARD
RECOMMENDATION. The
Board of Directors of FABC, at a meeting duly called and held, has by unanimous
vote of the directors present (who constituted all of the directors then in
office) (i) determined that this Agreement and the transactions contemplated
hereby, including the Mergers, taken together, are fair to and in the best
interests of the shareholders and (ii) resolved to recommend that the holders of
the shares of FABC Common Stock approve this Agreement.
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF CCBG
CCBG
hereby represents and warrants to FABC and First National as
follows:
5.1 ORGANIZATION,
STANDING, AND POWER. CCBG is
a corporation duly organized, validly existing, and in good standing under the
Laws of the State of Florida, and has the corporate power and authority to carry
on its business as now conducted and to own, lease and operate its Material
Assets. CCBG is duly qualified or licensed to transact business in good standing
in the jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a CCBG Material
Adverse Effect.
5.2 AUTHORITY
OF CCBG; NO BREACH BY AGREEMENT.
(a) CCBG has
the corporate power and authority necessary to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Mergers,
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of CCBG, subject to receipt of the requisite
Consents referred to in Section 8.1(b). This Agreement represents a legal,
valid, and binding obligation of CCBG, enforceable against CCBG in accordance
with its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors’ rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither
the execution and delivery of this Agreement by CCBG, nor the consummation by
CCBG of the transactions contemplated hereby, nor compliance by CCBG with any of
the provisions hereof, will (i) conflict with or result in a breach of any
provision of CCBG’s Articles of Incorporation or Bylaws, or (ii) subject to
receipt of the requisite Consents referred to Section 8.1(b), constitute or
result in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any CCBG Entity under, any Contract or
Permit of any CCBG Entity, where such Default or Lien, or any failure to obtain
such Consent, is reasonably likely to have, individually or in the aggregate, a
CCBG Material Adverse Effect, or, (iii) subject to receipt of the requisite
Consents referred to in Section 8.1(b), constitute or result in a Default under,
or require any Consent pursuant to, any Law or Order applicable to any CCBG
Entity or any of their respective Material Assets (including any CCBG Entity or
any FABC Entity becoming subject to or liable for the payment of any Tax or any
of the Assets owned by any CCBG Entity or any FABC Entity being reassessed or
revalued by any taxing authority).
(c) Other
than in connection or compliance with the provisions of the Securities Laws,
applicable state corporate and securities Laws, and rules of the NASD, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the IRS or the PBGC with respect to any employee benefit plans, or
under the HSR Act, and other than Consents, filings, or notifications which, if
not obtained or made, are not reasonably likely to have, individually or in the
aggregate, a CCBG Material Adverse Effect, no notice to, filing with, or Consent
of, any public body or authority is necessary for the consummation by CCBG of
the Mergers and the other transactions contemplated in this
Agreement.
5.3 CAPITAL
STOCK.
(a) The
authorized capital stock of CCBG consists of (i) 90,000,000 shares of CCBG
Common Stock, of which 14,162,048 shares are issued and outstanding as of the
date of this Agreement, and (ii) 3,000,000 shares of CCBG Preferred Stock, none
of which is issued and outstanding. All of the issued and outstanding shares of
CCBG Capital Stock are, and all of the shares of CCBG Common Stock to be issued
in exchange for shares of FABC Common Stock upon consummation of the Mergers,
when issued in accordance with the terms of this Agreement, will be, duly and
validly issued and outstanding and fully paid and nonassessable under the FBCA.
None of the outstanding shares of CCBG Capital Stock has been, and none of the
shares of CCBG Common Stock to be issued in exchange for shares of FABC Common
Stock upon consummation of the Mergers will be, issued in violation of any
preemptive rights of the current or past shareholders of CCBG.
(b) Except as
set forth in Section 5.3(a), or as provided pursuant to the CCBG Stock Plans, or
as disclosed in Section 5.3 of the CCBG Disclosure Memorandum, there are no
shares of capital stock or other equity securities outstanding and no
outstanding Equity Rights relating to the CCBG Capital Stock.
5.4 CCBG
SUBSIDIARIES. CCBG
has disclosed in Section 5.4 of the CCBG Disclosure Memorandum all of its
Significant Subsidiaries as of the date of this Agreement that are corporations
and all of the CCBG Subsidiaries that are general or limited partnerships or
other non-corporate entities. Each CCBG Subsidiary that is a depository
institution is an “insured institution” as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder.
5.5 SEC
FILINGS; FINANCIAL STATEMENTS.
(a) CCBG has
timely filed and made available to FABC all SEC Documents required to be filed
by CCBG since December 31, 2001 (the “CCBG SEC Reports”). The CCBG SEC Reports
(i) at the time filed, complied in all Material respects with the applicable
requirements of the Securities Laws and other applicable Laws and (ii) did not,
at the time they were filed (or, if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any untrue
statement of a Material fact or omit to state a Material fact required to be
stated in such CCBG SEC Reports or necessary in order to make the statements in
such CCBG SEC Reports, in light of the circumstances under which they were made,
not misleading.
(b) Each of
the CCBG Financial Statements (including, in each case, any related notes)
contained in the CCBG SEC Reports, including any CCBG SEC Reports filed after
the date of this Agreement until the Effective Time, complied as to form in all
Material respects with the applicable published rules and regulations of the SEC
with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q of the SEC), and fairly presented in all
Material respects the consolidated financial position of CCBG and its
Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be Material in amount
or effect.
5.6 ABSENCE
OF UNDISCLOSED LIABILITIES. Except
as disclosed in the CCBG Disclosure Memorandum, no CCBG Entity has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a CCBG Material Adverse Effect, except Liabilities which are accrued
or reserved against in the consolidated balance sheets
of CCBG
as of December 31, 2003, included in the CCBG Financial Statements
delivered prior to the date of this Agreement or reflected in the notes thereto.
Except as disclosed in the CCBG Disclosure Memorandum, no CCBG Entity has
incurred or paid any Liability since December 31, 2003, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a CCBG Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement.
5.7 ABSENCE
OF CERTAIN CHANGES OR EVENTS. Since
December 31, 2003, except as disclosed in the CCBG Financial Statements
delivered prior to the date of this Agreement or as disclosed in Section 5.7 of
the CCBG Disclosure Memorandum, (i) there have been no events, changes or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a CCBG Material Adverse Effect, and (ii) the CCBG Entities have
not taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a Material breach or violation of any of the
covenants and agreements of CCBG provided in Article 6.
5.8 ALLOWANCE
FOR POSSIBLE LOAN LOSSES. In the
opinion of management of CCBG, the Allowance shown on the consolidated balance
sheets of CCBG included in the most recent CCBG Financial Statements dated prior
to the date of this Agreement was, and the Allowance shown on the consolidated
balance sheets of CCBG included in the CCBG Financial Statements as of dates
subsequent to the execution of this Agreement will be, as of the dates thereof,
adequate (within the meaning of GAAP and applicable regulatory requirements or
guidelines) to provide for all known or reasonably anticipated losses relating
to or inherent in the loan and lease portfolios (including accrued interest
receivables) of the CCBG Entities and other extensions of credit (including
letters of credit) by the CCBG Entities as of the dates thereof.
5.9 INTELLECTUAL
PROPERTY. Each
CCBG Entity owns or has a license to use all of the Intellectual Property used
by such CCBG Entity in the course of its business. Each CCBG Entity is the owner
of or has a license to any Intellectual Property sold or licensed to a third
party by such CCBG Entity in connection with such CCBG Entity’s business
operations, and such CCBG Entity has the right to convey by sale or license any
Intellectual Property so conveyed. No CCBG Entity is in Default under any of its
Intellectual Property licenses. No proceedings have been instituted, or are
pending or to the Knowledge of CCBG threatened, which challenge the rights of
any CCBG Entity with respect to Intellectual Property used, sold or licensed by
such CCBG Entity in the course of its business, nor has any person claimed or
alleged any rights to such Intellectual Property. The conduct of the business of
the CCBG Entities does not infringe any Intellectual Property of any other
person. Except as disclosed in Section 5.6 of the CCBG Disclosure Memorandum, no
CCBG Entity is obligated to pay any recurring royalties to any Person with
respect to any such Intellectual Property. Except as disclosed in Section 5.9 of
the CCBG Disclosure Memorandum, every officer, director, or employee of any CCBG
Entity is a party to a Contract which requires such officer, director or
employee to assign any interest in any Intellectual Property to a CCBG Entity
and to keep confidential any trade secrets, proprietary data, customer
information, or other business information of a CCBG Entity, and to the
Knowledge of CCBG, no such officer, director or employee is party to any
Contract with any Person other than a CCBG Entity which requires such officer,
director or employee to assign any interest in any Intellectual Property to any
Person other than a CCBG Entity or to keep confidential any trade secrets,
proprietary data, customer information, or other business information of any
Person other than a CCBG Entity. Except as disclosed in Section 5.9 of the CCBG
Disclosure Memorandum, no officer, director or, to the Knowledge of CCBG, any
employee of any CCBG Entity is party to any Contract which restricts or
prohibits such officer,
director
or employee from engaging in activities competitive with any Person, including
any CCBG Entity.
5.10 COMPLIANCE
WITH LAWS. CCBG is
duly registered as a financial holding company under the BHC Act. Each CCBG
Entity has in effect all Permits necessary for it to own, lease or operate its
Material Assets and to carry on its business as now conducted, except for those
Permits the absence of which are not reasonably likely to have, individually or
in the aggregate, a CCBG Material Adverse Effect, and there has occurred no
Default under any such Permit, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a CCBG Material Adverse
Effect. Except as disclosed in Section 5.10 of the CCBG Disclosure Memorandum,
none of the CCBG Entities:
(a) is in
Default under its Articles of Incorporation or Bylaws (or other governing
instruments); or
(b) is in
Default under any Laws, Orders or Permits applicable to its business or
employees conducting its business, except for Defaults which are not reasonably
likely to have, individually or in the aggregate, a CCBG Material Adverse
Effect; or
(c) since
January 1, 2001, has received any notification or communication from any agency
or department of federal, state, or local government or any Regulatory Authority
or the staff thereof (i) asserting that any CCBG Entity is not in compliance
with any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a CCBG Material Adverse Effect, (ii)
threatening to revoke any Permits, or (iii) requiring any CCBG Entity to enter
into or consent to the issuance of a cease and desist order, formal agreement,
directive, commitment or memorandum of understanding, or to adopt any Board
resolution or similar undertaking, which restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, its credit or
reserve policies, its management, or the payment of dividends.
5.11 LEGAL
PROCEEDINGS. Except
as disclosed in Section 5.11 of the CCBG Disclosure Memorandum, there is no
Litigation instituted or pending, or, to the Knowledge of CCBG, threatened (or
unasserted but considered probable of assertion and which if asserted would have
at least a reasonable probability of an unfavorable outcome) against any CCBG
Entity or employee benefit plan of any CCBG Entity, or against any director or
employee of any CCBG Entity, in their capacity as such, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a CCBG Material Adverse Effect, nor are there
any Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any CCBG Entity, that are reasonably likely to
have, individually or in the aggregate, a CCBG Material Adverse
Effect.
5.12 REPORTS. Since
January 1, 2001, or the date of organization if later, each CCBG Entity has
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with Regulatory
Authorities (except, in the case of state securities authorities, failures to
file which are not reasonably likely to have, individually or in the aggregate,
a CCBG Material Adverse Effect). As of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all Material respects with all applicable Laws.
As of its respective date, each such report and document did not contain any
untrue statement of a Material fact or omit to state a Material fact required to
be stated therein
or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.13 STATEMENTS
TRUE AND CORRECT. No
statement, certificate, instrument or other writing furnished or to be furnished
by any CCBG Entity or any Affiliate thereof to FABC pursuant to this Agreement
or any other document, agreement or instrument referred to herein contains or
will contain any untrue statement of Material fact or will omit to state a
Material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any CCBG Entity or any Affiliate
thereof for inclusion in the Registration Statement to be filed by CCBG with the
SEC, will, when the Registration Statement becomes effective, be false or
misleading with respect to any Material fact, or omit to state any Material fact
necessary to make the statements therein not misleading. None of the information
supplied or to be supplied by any CCBG Entity or any Affiliate thereof for
inclusion in the Proxy Statement to be mailed to the shareholders of FABC in
connection with the Shareholders’ Meeting, and none of the information contained
in any other documents to be filed by any CCBG Entity or any Affiliate thereof
with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective times such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of FABC, be false or misleading with respect to any Material fact,
or omit to state any Material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Proxy Statement or any amendment thereof or supplement thereto,
at the time of the Shareholders’ Meeting, be false or misleading with respect to
any Material fact, or omit to state any Material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders’ Meeting. All documents that any CCBG Entity or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all Material respects with the provisions of applicable Law.
5.14 ACCOUNTING,
TAX AND REGULATORY MATTERS. No CCBG
Entity or any Affiliate thereof has taken or agreed to take any action or has
any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the Mergers from qualifying as a reorganization within the meaning of
Section 368(a) of the Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 8.1(b) or result in
the imposition of a condition or restriction of the type referred to in the last
sentence of such Section. All Tax Returns required under applicable Law to be
filed by or on behalf of any of the CCBG Entities through the date hereof have
been timely filed, and all such Tax Returns filed are complete and accurate in
all Material respects. All Taxes due and owing by any CCBG Entity (whether or
not shown on Tax Returns) have been paid. As of the date of this Agreement,
there is no audit examination, deficiency, or refund Litigation with respect to
any Taxes, except as reserved against in the most recent CCBG Financial
Statements delivered prior to the date of this Agreement and as disclosed in
Section 5.14 of the CCBG Disclosure Memorandum. Provision for Taxes due or to
become due for any of the CCBG Entities for the period or periods through and
including the day of the respective CCBG Financial Statements has been made and
is reflected on such CCBG Financial Statements and is sufficient to cover all
such Taxes.
ARTICLE
6
CONDUCT
OF BUSINESS PENDING CONSUMMATION
6.1 AFFIRMATIVE
COVENANTS OF FABC AND FIRST NATIONAL. From
the date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, unless the prior written consent of CCBG shall
have been obtained, and except as otherwise expressly contemplated herein, FABC
and First National shall operate their businesses only in the usual, regular and
ordinary course, and in a manner designed to preserve intact their business
organizations and Assets and maintain their rights and franchises, and shall
take no action which would (i) adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Section 8.1(b) or 8.1(c), or (ii) adversely affect the ability of
any Party to perform its covenants and agreements under this
Agreement.
6.2 NEGATIVE
COVENANTS OF FABC AND FIRST NATIONAL. From
the date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, unless the prior written consent of CCBG shall
have been obtained, and except as otherwise expressly contemplated herein, each
of FABC and First National covenants and agrees that it will not do or agree or
commit to do, or permit any of its Subsidiaries to do or agree or commit to do,
any of the following:
(a) amend the
Articles of Incorporation, Bylaws or other governing instruments of any FABC
Entity, except as expressly contemplated by this Agreement; or
(b) incur any
additional debt obligation or other obligation for borrowed money (other than
indebtedness of a FABC Entity to another FABC Entity) in excess of an aggregate
of $25,000 (for the FABC Entities on a consolidated basis) except in the
ordinary course of the business of FABC Subsidiaries consistent with past
practices (which shall include, for FABC Subsidiaries that are depository
institutions, creation of deposit liabilities, purchases of federal funds and
entry into repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any Asset of any FABC
Entity of any Lien or permit any such Lien to exist (other than in connection
with deposits, repurchase agreements, bankers acceptances, “treasury tax and
loan” accounts established in the ordinary course of business, the satisfaction
of legal requirements in the exercise of trust powers, and Liens in effect as of
the date hereof that are disclosed in the FABC Disclosure Memorandum);
or
(c) repurchase,
redeem, or otherwise acquire or exchange (other than exchanges in the ordinary
course under FABC Benefit Plans), directly or indirectly, any shares, or any
securities convertible into any shares, of the capital stock of any FABC Entity,
or except as consistent with past practice, declare or pay any dividend or make
any other distribution in respect of FABC Capital Stock or First National
Capital Stock; or
(d) except
for this Agreement or as disclosed in Section 6.2(d) of the FABC Disclosure
Memorandum, issue, sell, pledge, encumber, authorize the issuance of, enter into
any Contract to issue, sell, pledge, encumber, or authorize the issuance of, or
otherwise permit to become outstanding, any additional shares of FABC Common
Stock or any other capital stock of any FABC Entity, or any stock appreciation
rights, or any option, warrant, or other Equity Right; or
(e) adjust,
split, combine or reclassify any capital stock of any FABC Entity or issue or
authorize the issuance of any other securities in respect of or in substitution
for shares of FABC Common Stock, or sell, lease, mortgage or otherwise dispose
of or otherwise encumber (x) any shares of capital stock of any
FABC
Subsidiary
(unless any such shares of stock are sold or otherwise transferred to another
FABC Entity) or (y) any Asset having a book value in excess of $25,000 other
than in the ordinary course of business for reasonable and adequate
consideration; or
(f) except
for purchases of U.S. Treasury securities or U.S. Government agency securities,
which in either case have maturities of one year or less, purchase any
securities or make any Material investment, either by purchase of stock or
securities, contributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly owned FABC Subsidiary, or otherwise
acquire direct or indirect control over any Person, other than in connection
with (i) foreclosures in the ordinary course of business, or (ii) acquisitions
of control by a depository Subsidiary solely in its fiduciary capacity;
or
(g) (1) make
any new loans or extensions of credit or renew, extend or renegotiate any
existing loans or extensions of credit (i) with respect to properties or
businesses outside of the current market area for First National or to borrowers
whose principal residence is outside of the current market area for First
National, (ii) that are unsecured in excess of $100,000, or (iii) that are
secured in excess of $300,000; (2) purchase or sell (except for sales of single
family residential first mortgage loans in the ordinary course of FABC’s or
First National’s business for fair market value) any whole loans, leases,
mortgages or any loan participations or agented credits or other interest
therein, or (3) renew or renegotiate any loans or credits that are on any watch
list and/or are classified or special mentioned or take any similar actions with
respect to collateral held with respect to debts previously contracted or other
real estate owned, except pursuant to safe and sound banking practices and with
prior disclosure to CCBG; provided, however, that FABC or First National may,
without the prior notice to or written consent of CCBG, renew or extend existing
credits on substantially similar terms and conditions as present at the time
such credit was made or last extended, renewed or modified, for a period not to
exceed one year and at rates not less than market rates for comparable credits
and transactions and without any release of any collateral except as any FABC
Entity is presently obligated under existing written agreements kept as part of
such FABC Entity’s official records; or
(h) grant any
increase in compensation or benefits to the employees or officers of any FABC
Entity, except in accordance with past practice as disclosed in Section 6.2(h)
of the FABC Disclosure Memorandum or as required by Law; pay any severance or
termination pay or any bonus other than pursuant to plans, written policies or
written Contracts in effect on the date of this Agreement as disclosed in
Section 6.2(h) of the FABC Disclosure Memorandum; enter into or amend any
severance agreements with officers of any FABC Entity; grant any increase in
fees or other increases in compensation or other benefits to directors of any
FABC Entity except in accordance with past practice disclosed in Section 6.2(h)
of the FABC Disclosure Memorandum; or voluntarily accelerate the vesting of any
stock options or other stock-based compensation or employee benefits or other
Equity Rights; or
(i) enter
into or amend any employment Contract between any FABC Entity and any Person
(unless such amendment is required by Law) that such FABC Entity does not have
the unconditional right to terminate without Liability (other than Liability for
services already rendered), at any time on or after the Effective Time;
or
(j) adopt any
new FABC Benefit Plan or terminate or withdraw from, or make any Material change
in or to, any existing FABC Benefit Plan other than any such change that is
required by Law or this Agreement or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such plan, or
make any
distributions from such FABC Benefit Plans, except as required by Law, the terms
of such plans or consistent with past practice; or
(k) make any
significant change in any Tax or accounting methods or estimates or systems of
internal accounting controls, except as may be appropriate to conform to changes
in Tax Laws or regulatory accounting requirements or GAAP; or
(l) commence
any Litigation other than in accordance with past practice, settle any
Litigation involving any Liability of any FABC Entity for Material money damages
or restrictions upon the operations of any FABC Entity; or
(m) except in
the ordinary course of business and as expressly permitted in Section 6.2(g),
enter into, modify, amend or terminate any Material Contract calling for
payments exceeding $25,000 or waive, release, compromise or assign any Material
rights or claims.
6.3 COVENANTS
OF CCBG. From
the date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, unless the prior written consent of FABC shall
have been obtained, and except as otherwise expressly contemplated herein, CCBG
covenants and agrees that it shall (a) continue to conduct its business and the
business of its Subsidiaries in a manner designed in its reasonable judgment, to
enhance the long-term value of the CCBG Capital Stock and the business prospects
of the CCBG Entities and to the extent consistent therewith use all reasonable
efforts to preserve intact the CCBG Entities’ core businesses and goodwill with
their respective employees and the communities they serve, and (b) take no
action which would (i) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Section 8.1(b) or 8.1(c), or (ii) materially adversely affect the
ability of any Party to perform its covenants and agreements under this
Agreement; provided, that the foregoing shall not prevent any CCBG Entity from
acquiring any Assets or other businesses or from discontinuing or disposing of
any of its Assets or business if such action is, in the judgment of CCBG,
desirable in the conduct of the business of CCBG and its Subsidiaries. CCBG
further covenants and agrees that it will not amend or agree or commit to amend
or permit any of its Subsidiaries to amend or agree or commit to amend, without
the prior written consent of FABC, which consent shall not be unreasonably
withheld, the Articles of Incorporation or Bylaws of CCBG, in each case, in any
manner adverse to the holders of FABC Common Stock as compared to the rights of
holders of CCBG Common Stock generally as of the date of this
Agreement.
6.4 ADVERSE
CHANGES IN CONDITION. Each
Party agrees to give written notice promptly to the other Party upon becoming
aware of the occurrence or impending occurrence of any event or circumstance
relating to it or any of its Subsidiaries which (i) is reasonably likely to
have, individually or in the aggregate, an FABC Material Adverse Effect or a
CCBG Material Adverse Effect, as applicable, or (ii) would cause or constitute a
breach of any of its representations, warranties, or covenants contained herein,
and to use its reasonable efforts to prevent or promptly to remedy the
same.
6.5 REPORTS. Each
Party and its Subsidiaries shall file all reports required to be filed by it
with Regulatory Authorities between the date of this Agreement and the Effective
Time and shall deliver to the other Party copies of all such reports promptly
after the same are filed. If financial statements are contained in any such
reports filed with the SEC, such financial statements will fairly present in all
Material respects the consolidated financial position of the entity filing such
statements
as of the dates indicated and the consolidated results of operations, changes in
shareholders’ equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year-end adjustments that are not Material). As of their respective
dates, such reports filed with the SEC will comply in all Material respects with
the Securities Laws and will not contain any untrue statement of a Material fact
or omit to state a Material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
Laws applicable to such reports.
6.6 TAXES.
(a) Actions
Prior to Closing.
(1) Termination
of Existing Tax-Sharing Agreements. All
tax-sharing agreements or similar arrangements involving an FABC Entity or to
which an FABC Entity is a party shall be terminated with respect to such FABC
Entity before the Closing Date, and, after the Closing Date, such FABC Entity
shall not be bound thereby or have any Liability thereunder.
(2) Tax
Elections. No new
elections, and no changes in current elections, with respect to Taxes affecting
any FABC Entity shall be made after the date of this Agreement without the prior
written consent of CCBG, if such election or change would have the effect of
increasing the Tax Liability of any FABC Entity for any period after the Closing
Date.
(3) Tax
Certificates. FABC
shall provide CCBG, on or before the Closing Date, with (i) all forms,
certificates and/or other instruments required in connection with the transfer
and recording taxes and charges arising from the transactions contemplated by
this Agreement, together with evidence satisfactory to CCBG that such transfer
taxes and charges have been paid in full by FABC, and (ii) a clearance
certificate or similar documents which may be required by any state taxing
authority to relieve CCBG of any obligation to withhold any portion of payments
to FABC pursuant to this Agreement.
(4) Access
to Books and Records. Between
the date of the Agreement and the Closing Date, FABC and First National shall
give CCBG and its authorized representatives reasonable access to all books,
records and returns of each FABC Entity and have its personnel and accountants
available during normal business hours to respond to reasonable requests of CCBG
and its authorized representatives.
(b) Filing of
Tax Returns.
(1) FABC
shall prepare and timely file all Tax returns for all periods ending on or
before the Closing Date. All such returns shall be prepared in accordance with
past practice (unless a contrary position is required by Law) as to elections
and accounting practices to the extent any position taken in such returns may
affect the Tax Liability of FABC after the Closing. FABC shall discharge all tax
liabilities shown on such returns. In connection with preparation of such
returns, FABC shall prepare books and working papers (including a closing of the
books as of the Closing Date) which shall clearly demonstrate the income and
activities of each FABC Entity for the period ending on the Closing Date. FABC
shall provide a copy of such returns to CCBG for its review at least 20 days
before the filing of such
returns.
FABC shall not file any amended return for a period ending on or before the
Closing without CCBG’s written consent (which consent shall not be unreasonably
withheld or delayed) if the filing of any such amended return may affect the Tax
Liability of any FABC Entity or for which CCBG is or may become
liable.
(2) CCBG
shall prepare and timely file all Tax returns with respect to FABC other than
the Tax returns referred to in Section 6.6(b)(1)above, that are required to be
filed after the Closing, and shall duly and timely pay Taxes due on such Tax
returns.
(c) Carryovers
and Carrybacks. For
purposes of this Section, Tax or Taxes shall include the amount of Taxes which
would have been paid but for the application of any credit or net operating or
capital loss deduction attributable to periods beginning after the Closing Date
or to any Post-Closing Partial Period.
(d) Allocation
Between Partial Periods. Any
Taxes for any period beginning before the Closing Date and ending after the
Closing Date (a “Straddle Period”) shall be apportioned between the Pre-Closing
Partial Period and the Post-Closing Partial Period, based, in the case of real
and personal property Taxes, on a per diem basis and, in the case of other Taxes
(including, without limitation, income Taxes and Taxes in lieu of income Taxes),
on the actual activities, taxable income or taxable loss of FABC during such
Pre-Closing Partial Period and such Post-Closing Partial Period, based on a
closing of the books as of the close of business on the Closing Date. FABC shall
not be permitted to carry out any transaction outside the ordinary course of its
trade or business on the Closing Date after the Closing (other than the
transactions expressly permitted by this Agreement). “Pre-Closing Partial
Period” shall mean the portion of the Straddle Period up to and including the
Closing Date, and “Post-Closing Partial Period” shall mean the portion of the
Straddle Period following the Closing Date.
(e) Control
of Post-Closing Audits and Other Proceedings. FABC
shall cause Jerry M. Smith to deliver to CCBG upon the execution of this
Agreement a letter agreement, substantially in the form of Exhibit
2.
ARTICLE
7
ADDITIONAL
AGREEMENTS
7.1 REGISTRATION
STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL. As soon
as reasonably practicable after execution of this Agreement, at a date
determined by CCBG in its sole discretion, CCBG shall prepare and file the
Registration Statement with the SEC, and shall use its reasonable best efforts
to cause the Registration Statement to become effective under the 1933 Act and
take any action required to be taken under the applicable state Blue Sky or
securities Laws in connection with the issuance of the shares of CCBG Common
Stock upon consummation of the Mergers. FABC and First National shall each
cooperate in the preparation and filing of the Registration Statement and shall
each furnish all information concerning it and the holders of its capital stock
as CCBG may reasonably request in connection with such action. FABC shall call a
Shareholders’ Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. In connection with the Shareholders’ Meeting, (i) CCBG shall
prepare and file with the SEC the Registration Statement which shall contain the
Proxy Statement and FABC shall mail such Proxy Statement to the FABC
shareholders, (ii) FABC shall furnish to CCBG all information concerning FABC
that CCBG may reasonably request in connection with such Proxy Statement, (iii)
the Board
of
Directors of FABC shall recommend to FABC shareholders the approval of the
matters submitted for approval, and (iv) the Board of Directors and officers of
FABC shall use their reasonable efforts to obtain such shareholders’ approval.
CCBG and FABC shall make all necessary filings with respect to the Mergers under
the Securities Laws.
7.2 NASDAQ
LISTING. CCBG
shall use its reasonable best efforts to list, prior to the Effective Time, on
the Nasdaq National Market the shares of CCBG Common Stock to be issued to the
holders of FABC Common Stock pursuant to the Holding Company Merger, and CCBG
shall give all notices and make all filings with the NASD required in connection
with the transactions contemplated herein.
7.3 APPLICATIONS. CCBG
shall promptly prepare and file, and FABC and First National shall cooperate in
the preparation and, where appropriate, filing of, applications with all
Regulatory Authorities having jurisdiction over the transactions contemplated by
this Agreement seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement. The Parties shall deliver to each
other copies of all filings, correspondence and orders to and from all
Regulatory Authorities in connection with the transactions contemplated
hereby.
7.4 FILINGS
WITH STATE OFFICES. Upon
the terms and subject to the conditions of this Agreement, CCBG shall execute
and file, in connection with the Closing, the Articles of Merger, or such other
required filings to effectuate the Mergers, with the Secretary of State of the
State of Florida.
7.5 AGREEMENT
AS TO EFFORTS TO CONSUMMATE. Subject
to the terms and conditions of this Agreement, each Party agrees to use, and to
cause its Subsidiaries to use, its reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable Laws to consummate and make effective, as
soon as reasonably practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including using its reasonable
efforts to lift or rescind any Order adversely affecting its ability to
consummate the transactions contemplated herein and to cause to be satisfied the
conditions referred to in Article 8; provided, that nothing herein shall
preclude any Party from exercising its rights under this Agreement. Each Party
shall use, and shall cause each of its Subsidiaries to use, its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
7.6 INVESTIGATION
AND CONFIDENTIALITY.
(a) Prior to
the Effective Time, each Party shall keep the other Party advised of all
Material developments relevant to its business and to consummation of the
Mergers.
(b) Prior to
the Effective Time, FABC and First National shall permit and allow CCBG to make
or cause to be made, at CCBG’s own expense, such investigation(s) of the
business and properties of FABC and its Subsidiaries, and of their respective
financial and legal conditions, as CCBG reasonably requests, provided that such
investigation(s) shall be reasonably related to the transactions contemplated
hereby. In order
to perform or to conduct any such investigation(s) described in this Section
7.6(b), or as permitted in Section 7.20, FABC and First
National shall
grant CCBG the right to gain reasonable access to the businesses and properties
of each FABC Entity. No investigations by a Party shall affect the
representations and warranties of the other Party.
(c) If
any
investigation(s) of CCBG
conducted pursuant
to Section 7.6(b)
results in a finding of an event or circumstance that has had or is reasonably
likely to have an FABC Material Adverse Effect (an “Adverse Finding”), CCBG
shall have the
right, but not the obligation (unless
required by Section 7.6(f)), to
elect to identify and describe in writing to FABC such
Adverse
Finding and to request its
correction, cure, or other resolution, to CCBG’s complete
satisfaction (which CCBG shall
in good
faith determine
in its sole
discretion), within a specific period of time. Any such action taken by CCBG
pursuant
to the foregoing sentence (1)
shall not
waive
CCBG’s right
to terminate this Agreement and abandon
the Mergers without penalty and at any time before the Closing Date pursuant to
Section
9.1(h), provided FABC fails to cure the Adverse Finding to CCBG’s satisfaction
in the time granted to FABC, and (2) shall not, in any way, act as a waiver as
to any other right(s) granted
to CCBG pursuant to this Agreement.
(d) In
addition to the Parties’ respective obligations under the Confidentiality
Agreement, which are hereby reaffirmed and incorporated by reference herein,
each Party shall, and shall cause its advisers and agents to, maintain the
confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries’ businesses, operations, and financial
positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. In the event
that a Party is required by applicable Law or valid court process to disclose
any such confidential information, then such Party shall provide the other Party
with prompt written notice of any such requirement so that the other Party may
seek a protective Order or other appropriate remedy and/or waive compliance with
this Section 7.6. If in the absence of a protective Order or other remedy or the
receipt of a waiver by the other Party, a Party is nonetheless, in the written
opinion of counsel, legally compelled to disclose any such confidential
information to any tribunal or else stand liable for contempt or suffer other
censure or penalty, a Party may, without Liability hereunder, disclose to such
tribunal only that portion of the confidential information which such counsel
advises such Party is legally required to be disclosed, provided that such
disclosing Party uses its best efforts to preserve the confidentiality of such
confidential information, including without limitation, by cooperating with the
other Party to obtain an appropriate protective Order or other reliable
assurance that confidential treatment will be accorded such confidential
information by such tribunal. If this Agreement is terminated prior to the
Effective Time, upon written request of the other Party, each Party shall
promptly return or certify the destruction of all documents and copies thereof,
and all work papers containing confidential information received from the other
Party.
(e) FABC
shall use its reasonable efforts to exercise its rights under confidentiality
agreements entered into with Persons, if any, which were considering an
Acquisition Proposal with respect to any FABC Entity to preserve the
confidentiality of the information relating to such FABC Entity provided to such
Persons and their Affiliates and Representatives.
(f) Each
Party agrees to give the other Party notice as soon as practicable after any
determination by it of any fact or occurrence relating to the other Party which
it has discovered through the course of its investigation and which represents,
or is reasonably likely to represent, either a Material breach of any
representation, warranty, covenant or agreement of the other Party or which has
had or is reasonably likely to have an FABC Material Adverse Effect or a CCBG
Material Adverse Effect, as applicable; provided, that, as applied to any
obligations of CCBG, CCBG shall be governed by the provisions of Section
7.6(c).
(g) Upon
request of CCBG, FABC and First National shall request within 10 days of the
date thereof, that all third parties that received confidential information
regarding FABC or any of its Subsidiaries within the last 12 months in
connection with a possible sale or merger transaction involving FABC or any of
its Subsidiaries promptly return such confidential information to FABC or First
National.
7.7 PRESS
RELEASES. Prior
to the Effective Time, FABC, First National and CCBG shall consult with each
other as to the form and substance of any press release or other public
disclosure materially related to this Agreement or any other transaction
contemplated hereby; provided, that nothing in this Section 7.7 shall be deemed
to prohibit any Party from making any disclosure which its counsel deems
necessary or advisable in order to satisfy such Party’s disclosure obligations
imposed by Law.
7.8 CERTAIN
ACTIONS. Except
with respect to this Agreement and the transactions contemplated hereby, no FABC
Entity nor any Affiliate thereof nor any Representatives thereof retained by any
FABC Entity shall directly or indirectly solicit any Acquisition Proposal by any
Person. Except to the extent the Board of Directors of FABC reasonably
determines in good faith, based and relying upon a written opinion from its
outside counsel, that the failure to take such actions would constitute a breach
of fiduciary duties of the members of such Board of Directors to FABC’s
shareholders under applicable Law, no FABC Entity or any Affiliate or
Representative thereof shall furnish any non-public information that it is not
legally obligated to furnish, negotiate with respect to, or enter into any
discussions or Contract with respect to, any Acquisition Proposal, but FABC may
communicate information about such an Acquisition Proposal to its shareholders
if and to the extent that it is required to do so in order to comply with its
legal obligations. FABC and First National shall promptly advise CCBG following
the receipt of any Acquisition Proposal and the details thereof, and advise CCBG
of any developments with respect to such Acquisition Proposal promptly upon the
occurrence thereof. FABC and First National shall (i) immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any Persons conducted heretofore with respect to any of the foregoing, (ii)
direct and use its reasonable best efforts to cause all of its Affiliates and
Representatives not to engage in any of the foregoing, and (iii) use its
reasonable best efforts to enforce any confidentiality or similar agreement
relating to any such activities, discussions, negotiations or Acquisition
Proposal. FABC and First National will take all actions necessary or advisable
to inform the appropriate individuals or entities referred to in the first
sentence of this Section 7.8 of the obligations undertaken in this Section
7.8.
7.9 ACCOUNTING
AND TAX TREATMENT. Each of
the Parties undertakes and agrees to use its reasonable efforts to cause the
Mergers, and to use its reasonable efforts to take no action which would cause
the Mergers not, to qualify as a “reorganization” within the meaning of Section
368(a) of the Code for federal income tax purposes.
7.10 STATE
TAKEOVER LAWS. Each
FABC Entity and its Affiliates shall take the necessary steps to exempt the
transactions contemplated by this Agreement from, or if necessary to challenge
the validity or applicability of, any applicable Takeover Law, including
Sections 607.0901 and 607.0902 of the FBCA.
7.11 CHARTER
PROVISIONS. Each
FABC Entity shall take all necessary action to ensure that the entering into of
this Agreement and the consummation of the Mergers and the other transactions
contemplated hereby do not and will not result in the grant of any rights to any
Person under the Articles of Incorporation, Bylaws or other governing
instruments of any FABC Entity or restrict or impair the ability of
CCBG or
any of its Subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of any FABC Entity that may be directly or
indirectly acquired or controlled by them.
7.12 FABC
AND FIRST NATIONAL MEETINGS. Each
FABC Entity shall give CCBG prior notice of each meeting or proposed action by
any of their respective Board of Directors and/or committees, including a
description of any matters to be discussed and/or acted upon, and shall within a
reasonable period of time after each such meeting occurs provide CCBG copies of
all Minutes of each such meeting, except portions of the Minutes discussing the
transactions contemplated herein that present conflict of interest and/or
confidentiality issues.
7.13 AGREEMENT
OF AFFILIATES. FABC
has disclosed in Section 7.13 of the FABC Disclosure Memorandum all Persons whom
it reasonably believes is an “affiliate” of FABC for purposes of Rule 145 under
the 1933 Act. FABC shall cause each such Person to deliver to CCBG upon the
execution of this Agreement a written agreement, substantially in the form of
Exhibit 3, providing that such Person will not sell, pledge, transfer, or
otherwise dispose of the shares of FABC Common Stock held by such Person except
as contemplated by such agreement or by this Agreement and will not sell,
pledge, transfer, or otherwise dispose of the shares of CCBG Common Stock to be
received by such Person upon consummation of the Mergers except in compliance
with applicable provisions of the 1933 Act and the rules and regulations
thereunder. CCBG shall be entitled to place restrictive legends upon
certificates for shares of CCBG Common Stock issued to affiliates of FABC
pursuant to this Agreement to enforce the provisions of this Section 7.13;
provided that CCBG removes such legends at the appropriate time. CCBG shall not
be required to maintain the effectiveness of the Registration Statement under
the 1933 Act for the purposes of resale of CCBG Common Stock by such
affiliates.
7.14 EMPLOYEE
BENEFITS AND CONTRACTS.
(a) Following
the Effective Time, CCBG shall provide generally to officers and employees of
the FABC Entities employee benefits under employee benefit and welfare plans
(other than stock option or other plans involving the potential issuance of CCBG
Common Stock), on terms and conditions which when taken as a whole are
substantially similar to those currently provided by the CCBG Entities to their
similarly situated officers and employees. CCBG shall waive any pre-existing
condition exclusion under any employee health plan for which any employees
and/or officers and dependents are covered by FABC plans as of Closing, to the
extent that (i) such pre-existing condition was covered under the corresponding
plan maintained by the FABC Entity and (ii) the individual affected by the
pre-existing condition was covered by the FABC Entity’s corresponding plan on
the date which immediately precedes the Effective Time, provided further,
however, that any portion of a pre-existing condition exclusion period imposed
by a CCBG employee health plan shall not be enforced to the extent it exceeds in
duration any corresponding provision in effect under an FABC Benefit Plan
immediately prior to Closing. In addition, CCBG shall credit employees of any
FABC Entity for amounts paid under FABC Benefit Plans for the applicable plan
year that contains the Closing Date for purposes of applying deductibles,
co-payments and out-of-pocket limitations under CCBG health plans. For purposes
of participation and vesting (but not benefit accrual) under CCBG’s employee
benefit plans, the service of the employees of any FABC Entity prior to the
Effective Time shall be treated as service with a CCBG Entity participating in
such employee benefit plans. For purposes of participation and vesting (but not
benefit accrual) under CCBG’s vacation policy, the service of the employees of
the FABC Entities prior to the Effective Time shall be treated as service with a
CCBG Entity subject to such policy.
(b) Jerry M.
Smith shall enter into a three year employment agreement with CCBG in the form
attached hereto as Exhibit 4 (the “Executive Employment
Agreement”).
(c) Subject
to compliance with applicable Laws and the absence of any Material Adverse
Effect upon CCBG or any FABC Benefit Plans or CCBG Benefit Plans, FABC shall
prior to Closing take such actions as are necessary to terminate each FABC
Benefit Plan (other than the Executive Indexed Salary Continuation Plan, by and
between Jerry M. Smith and First National Bank of Alachua, dated June 1, 1995
(the “Executive Indexed Salary Continuation Plan”), the Endorsement Method Split
Dollar Plan Agreement, dated June 1, 1995, and the First National Bank of
Alachua 401(k) Profit Sharing Plan (the “Alachua 401(k) Plan”)) and to
distribute all benefits attributable thereto as soon as administratively
feasible.
7.15 ALACHUA
401(K) PLAN QUALIFICATION.
(a) First
National, as the sponsor of the Alachua 401(k) Plan, and Jerry M. Smith, as
co-trustee of the Alachua 401(k) Plan, shall take all actions reasonably
necessary prior to the Closing Date to submit a proper application to the IRS
pursuant to the Employee Plans Compliance Resolution System (“EPCRS
Application”) as set forth in Revenue Procedure 2003-44 (or successor guidance)
that will contain a reasonable proposal to address the matters described in
Section 4.15 of the FABC Disclosure Memorandum so as to obtain IRS approval
of such corrections thereto.
It is
understood and agreed that such corrections may, if necessary, be made after the
Closing Date and that such IRS approval may be obtained after the Closing Date.
Jerry M. Smith, as co-trustee of the Alachua 401(k) Plan, shall consult with
CCBG and CCBG’s legal counsel prior to taking any such actions, shall obtain
CCBG and CCBG’s legal counsel’s prior approval in connection with any IRS or
PBGC submissions, communications, filings, or applications, and shall provide
CCBG at Closing with documentation of the actions ultimately
implemented.
(b) CCBG,
FABC, First National, and Jerry M. Smith, as co-trustee of the Alachua 401(k)
Plan, expressly agree that, at all times subsequent to Closing, all Participants
in the Alachua 401(k) Plan shall make all elective deferrals exclusively to the
Capital City Bank Group, Inc. 401(k) Plan. Upon approval by the IRS of the EPCRS
Application, CCBG, in its sole discretion, may elect to (x) freeze the Alachua
401(k) Plan; (y) terminate the Alachua 401(k) Plan; or (z) merge the Alachua
401(k) Plan with the Capital City Bank Group, Inc. 401(k) Plan as a successor
plan. Prior to the Closing, First National may continue to pay in the ordinary
course the reasonable fees and expenses relating to the administration of the
Alachua 401(k) Plan, subject, however, to the provisions of this Agreement
relating to certain 401(k) Plan Liabilities and any Corrections required
pursuant to the EPCRS Application. After the Closing, CCBG will pay in the
ordinary course all reasonable fees and expenses relating to the administration
of the Alachua 401(k) Plan, subject, however, to the provisions of this
Agreement relating to certain Alachua 401(k) Plan Liabilities and any
Corrections required pursuant to the EPCRS Application. FABC and First National
have described in Section 7.15(b) of the FABC Disclosure Memorandum the fees and
expenses that First National has paid to service providers relating to the
Alachua 401(k) Plan.
(c) CCBG,
FABC, First National, and Jerry M. Smith, as co-trustee of the Alachua 401(k)
Plan, expressly agree that, at all times subsequent to the execution of this
Agreement, no stock or other security issued by any FABC Entity or CCBG Entity
held in the Alachua 401(k) Plan shall be withdrawn or transferred by any
Participant until CCBG, in its sole discretion, determines that the terms of the
IRS compliance statement pursuant to the EPCRS Application have been
met.
(d) With
respect to the EPCRS Application, First National, and subsequent to Closing,
CCBG, shall pay all fees and expenses, including all legal fees of counsel to
First National, accounting fees, filing fees, and application fees, subject to
the indemnification provisions in the letter agreement, which is attached to
this Agreement substantially in the form of Exhibit 2; provided, however, that
to the extent the IRS or any other governmental agency or applicable Law (i)
prohibits any FABC Entity or CCBG Entity from paying such fees and expenses; or
(ii) deems such amount to be penalties, Jerry M. Smith, individually, shall pay
all fees and expenses, including all legal fees, accounting fees, filing fees,
and application fees.
(e) Jerry M.
Smith, to the extent Mr. Smith has direct control over the implementation of
corrections set forth in the IRS compliance statement, and the then sponsor of
the Alachua 401(k) Plan shall be responsible for timely and properly
implementing the corrections set forth in the IRS compliance statement pursuant
to the EPCRS Application, subject to the indemnification provisions in the
letter agreement, which is attached to this Agreement substantially in the form
of Exhibit 2.
(f) FABC
shall cause Jerry M. Smith to deliver to CCBG upon execution of this Agreement a
letter agreement, substantially in the form of Exhibit 2.
7.16 INDEMNIFICATION.
(a) With
respect to all claims brought during the period of three (3) years after the
Effective Time, CCBG shall indemnify, defend and hold harmless the present and
former directors, officers and employees of FABC and First National (each, an
“Indemnified Party”) against all Liabilities arising out of actions or omissions
arising out of the Indemnified Party’s service or services as directors,
officers or employees of FABC and First National or, at FABC’s request, of
another corporation, partnership, joint venture, trust or other enterprise
occurring at or prior to the Effective Time (including the transactions
contemplated by this Agreement) to the fullest extent permitted under Florida
Law. Notwithstanding the foregoing, with respect to all losses, Liabilities,
damage, costs, claims, and expenses related to Alachua 401(k) Plan Liabilities,
no CCBG Entity shall indemnify, defend or hold harmless the present and former
trustees of the Alachua 401(k) Plan, including Jerry M. Smith and Frank Bevis.
Without limiting the foregoing, in any case in which approval by the Surviving
Corporation is required to effectuate any indemnification, the Surviving
Corporation shall direct, at the election of the Indemnified Party, that the
determination of any such approval shall be made by independent counsel mutually
agreed upon between CCBG and the Indemnified Party.
(b) CCBG
shall, to the extent available, (and FABC and First National shall cooperate
prior to the Effective Time in these efforts) maintain in effect for a period of
three years after the Effective Time directors’ and officers’ liability
insurance with respect to claims arising from facts or events which occurred up
to twelve (12) months prior to the Effective Time and covering the Indemnified
Parties; provided, that CCBG shall not be obligated to make aggregate premium
payments for such three-year period in respect of such an insurance policy (or
coverage replacing such a policy) which exceed $45,000 for the portion related
to FABC’s and First National’s directors and officers.
(c) Promptly
after receipt by an Indemnified Party of notice of any complaint or the
commencement of any action or proceeding with respect to which indemnification
is being sought hereunder, such party will notify the indemnifying party in
writing of such complaint or of the commencement of such action or
proceeding.
A failure to notify the indemnifying party will not relieve the indemnifying
party from any Liability it may have hereunder or otherwise, except to the
extent that such failure materially prejudices the indemnifying party’s rights
or its ability to defend against such complaint, action or proceeding. If the
indemnifying party so elects or is requested by such Indemnified Party, it will
assume the defense of such action or proceeding, including the employment of
counsel (which may be counsel to the indemnifying party) reasonably satisfactory
to the Indemnified Party and the payment of the fees and disbursements of such
counsel. In the event, however, that such Indemnified Party reasonably
determines in its judgment that having common counsel would present such counsel
with a conflict of interest or if the indemnifying party fails to assume the
defense of the action or proceeding in a timely manner, then such Indemnified
Party may employ separate counsel to represent or defend it in any such action
or proceeding and the indemnifying party will pay the fees and disbursements of
such counsel; provided, however, that the indemnifying party will not be
required to pay the fees and disbursements of more than one separate counsel for
all indemnified parties in any jurisdiction in any single action or proceeding.
The Indemnified Party will cooperate with the indemnifying party in the defense
of any such action or proceeding. In any action or proceeding the defense of
which is assumed by the indemnifying party, the Indemnified Party will have the
right to participate in such action or proceeding and to retain its own counsel
at such Indemnified Party’s own expense. The indemnifying party shall not be
liable for any settlement effected without its prior written consent. The
indemnifying party shall not have any obligation hereunder to the Indemnified
Party when and if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of the
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
7.17 CERTAIN
POLICIES OF FABC. CCBG,
FABC, and First National shall consult with respect to their respective major
policies and practices and FABC and First National shall make such modification
or changes to their policies and practices, if any, prior to the Effective Time
as may be mutually agreed upon. CCBG, FABC, and First National also shall
consult with respect to the character, amount and timing of restructuring and
Merger-related expense charges to be taken by each of the Parties in connection
with the transactions contemplated by this Agreement and shall take such charges
in accordance with GAAP, prior to the Effective Time, as may be mutually agreed
upon by the Parties. Neither Party’s representations, warranties, covenants or
agreements contained in this Agreement shall be deemed to be inaccurate or
breached in any respect as a consequence of any modifications or charges
undertaken solely on account of this Section.
7.18 DIRECTOR
AND VOTING AGREEMENTS.
Concurrently with the execution and delivery of this Agreement, FABC and First
National agree to cause each of their directors to execute and deliver a
Director and Voting Agreement in the form attached hereto as Exhibit
5.
7.19 PAYMENT
OF BONUS. CCBG
agrees that either CCBG or CCB shall pay to Jerry M. Smith on the Closing Date a
lump-sum bonus in cash in an amount equal to the maximum amount payable without
triggering an excise tax under Section 4999 of the Code or a deduction
limitation under Section 280G of the Code; provided that such bonus shall not
exceed $1 million.
7.20 REAL
PROPERTY MATTERS. At its
option and expense, CCBG may cause to be conducted: (1) a title examination,
physical survey, zoning compliance review, and structural inspection of the Real
Property and improvements thereon that is used by any FABC Entity as a banking
office (collectively, the “Property Examination”); and (2) site inspections,
historic reviews, regulatory analyses, and environmental
investigations
and assessments of the Real Property as CCBG shall deem necessary or desirable
(collectively, the “Environmental Survey”). The Environmental Survey may
include, but shall not be limited to: (i) CCBG’s right to perform a Phase I
Environmental Site Assessment (pursuant to ASTM Standard E 1527-00 or ASTM
Standard E 1527-97) in connection with any businesses or properties of any FABC
Entity, including any of its Participation Facilities or its Operating
Facilities, (ii) CCBG’s right to perform or to conduct any other environmental
investigations, inspections, assessments, site reconnaissance, or site visits,
or environmental sampling, testing, analysis, or monitoring activities, in
connection with any businesses or properties of any FABC Entity, including its
Participation Facilities or its Operating Facilities, and (iii) CCBG’s right to
request and to obtain from any FABC Entity any information or documents,
including, but not limited to, environmental reports and regulatory agency
correspondence, in any FABC Entity’s possession or control relating to the
matters described in this Section 7.20. In order to perform or to conduct any
such investigation(s) described in this Section 7.20, each FABC Entity shall
grant CCBG the right to gain reasonable access to any businesses and properties
of any FABC Entity, including access to its Participation Facilities or its
Operating Facilities. Should CCBG elect to complete an Environmental Survey of
any Real Property, it shall notify FABC or First National before commencing the
Environmental Survey and shall make reasonable efforts to coordinate the
Environmental Survey with FABC and First National.
If, in
the course of the Property Examination or Environmental Survey, CCBG determines
that a “Material Defect” (as defined below) exists with respect to the Real
Property, CCBG shall have the option, at its sole discretion, exercisable upon
written notice to FABC or First National (“Material Defect Notice”) to: (1)
direct FABC or First National to cure the Material Defect to CCBG’s reasonable
satisfaction; (2) terminate this Agreement in the event of a Material Defect
under Subsection (a) of the “Material Defect” definition; (3) terminate this
Agreement in the event of a Material Defect under Subsections (b) or (c) of the
“Material Defect” definition if CCBG reasonably believes the cost to cure the
Material Defect will be greater than or equal to $200,000; or (4) waive the
Material Defect. A termination under Section (2) or (3) of this paragraph shall
be deemed to be a termination under Section 9.1(a).
If CCBG
elects to direct FABC or First National to cure, then FABC or First National
shall have thirty (30) days from the date of the receipt of the Material Defect
Notice, or such later time, which shall not be later than the Closing Date, as
shall be mutually agreeable to the parties in which to cure such Material Defect
to CCBG’s reasonable satisfaction. If FABC or First National fails to cure a
Material Defect to CCBG’s reasonable satisfaction within the period specified
above, then CCBG may terminate this Agreement (with such termination being
deemed to be a termination under Section 9.1(h)).
For
purposes of this Agreement, a “Material Defect” shall include:
(a) the
existence of any Lien (other than the lien of Real Property Taxes not yet due
and payable), encumbrance, zoning restriction, easement, covenant or other
restriction, title imperfection or title irregularity, or the existence of any
facts or conditions that constitute a Material breach of the representations and
warranties contained in Section 4.10 or 4.11, in either such case that CCBG
reasonably believes will materially adversely affect its use of any parcel of
the Real Property for the purpose for which it currently is used or the value or
marketability of any parcel of the Real Property, or as to which CCBG otherwise
reasonably objects;
(b) the
existence of any structural defects or conditions of disrepair in the
improvements on the Real Property (including any equipment, fixtures or other
components related thereto) that CCBG reasonably believes would cost more than
$25,000 in the aggregate to repair, remove or correct as to all such Real
Property; or
(c) the
existence of facts or circumstances relating to any of the Real Property
reflecting that: (1) there likely has been a discharge, disposal, release,
threatened release, or emission by any Person of any Hazardous Material on,
from, under, at, or relating to the Real Property; or (2) any action has been
taken or not taken, or a condition or event likely has occurred or exists, with
respect to the Real Property which constitutes or would constitute a violation
of any Environmental Laws as to which CCBG reasonably believes, based on the
advice of legal counsel or other consultants, that an FABC Entity could become
responsible or liable, or that CCBG could become responsible or liable,
following the Closing Date, for assessment, removal, remediation, monetary
damages, or civil, criminal or administrative penalties or other corrective
action and in connection with which the amount of expense or Liability which an
FABC Entity could incur, or for which CCBG could become responsible or liable,
following the Closing Date, could equal or exceed an aggregate of $25,000 or
more as to all such Real Property.
7.21 FAIRNESS
OPINION. FABC
shall obtain from SunTrust Robinson Humphrey, a letter, dated the date that the
FABC Board of Directors approved this Agreement, to the effect that, in the
opinion of such firm, the consideration to be received by FABC shareholders in
connection with the Mergers is fair, from a financial point of view, to such
shareholders, a signed copy of which shall be promptly delivered to
CCBG.
7.22 NON-COMPETITION
AGREEMENTS.
Following
the execution and delivery of this Agreement, FABC agrees to use its best
efforts to cause individuals identified by CCBG to execute and deliver a
Non-Competition Agreement in the form attached hereto as Exhibit 6.
7.23 FABC
AUDITED FINANCIAL STATEMENTS. FABC
agrees to engage Crowe Chizek and Company LLC, certified public accountants (the
“Auditor”), on or before the twentieth (20th) day after the date this Agreement
is executed, to audit the FABC Audited Financial Statements and to use its best
efforts to cause the Auditor to certify such audited financial statements on or
before April 15, 2005. FABC and CCBG agree to each pay one-half of the fees for
this audit of the FABC Audited Financial Statements. FABC shall book the Audit
Adjustments to the FABC Financial Statements, and these Audit Adjustments shall
be reflected in the calculation of “net worth” in Section 8.2(f). In the
event that the Audit Adjustments reflect, in whole or in part, accounting
procedures or policies of FABC or First National that are not consistent with
GAAP, FABC and First National agree to modify immediately their accounting
procedures and policies to conform with GAAP. FABC and First National shall
prepare the FABC Financial Statements, for periods as of or ending on a date
that occurs subsequent to September 30, 2004, in accordance with such modified
accounting procedures and policies.
7.24 ALLOWANCE
FOR POSSIBLE LOAN LOSSES. The
Allowance reflected in the FABC Financial Statements as of the Effective Time
will be adequate (within the meaning of GAAP and applicable regulatory
requirements or guidelines) to provide for all known or reasonably anticipated
losses relating to or inherent in the loan and lease portfolio of the FABC
Entities and other extensions of credit (including letters of credit) by the
FABC Entities as of the dates thereof.
ARTICLE
8
CONDITIONS
PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 CONDITIONS
TO OBLIGATIONS OF EACH PARTY. The
respective obligations of each Party to perform this Agreement and consummate
the Mergers and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by both Parties pursuant
to Section 10.6:
(a) Shareholder
Approval. The
shareholders of FABC shall have approved this Agreement, and the consummation of
the transactions contemplated hereby, including the Mergers, as and to the
extent required by Law or by the provisions of any governing instruments. The
shareholders of CCBG shall have approved the issuance of shares of CCBG Common
Stock pursuant to the Mergers, as and to the extent required by Law, by the
provisions of any governing instruments, or by the rules of the
NASD.
(b) Regulatory
Approvals. All
Consents of, filings and registrations with, and notifications to, all
Regulatory Authorities required for consummation of the Mergers shall have been
obtained or made and shall be in full force and effect and all waiting periods
required by Law shall have expired. No Consent obtained from any Regulatory
Authority which is necessary to consummate the transactions contemplated hereby
shall be conditioned or restricted in a manner (including requirements relating
to the raising of additional capital or the disposition of Assets) which in the
reasonable judgment of the Board of Directors of CCBG or of FABC would so
materially adversely affect the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, such Party would not, in its reasonable judgment, have
entered into this Agreement.
(c) Consents
And Approvals. Each
Party shall have obtained any and all Consents required for consummation of the
Mergers (other than those referred to in Section 8.1(b)) or for the preventing
of any Default under any Contract or Permit of such Party which, if not obtained
or made, is reasonably likely to have, individually or in the aggregate, an FABC
Material Adverse Effect or a CCBG Material Adverse Effect, as applicable. No
Consent so obtained which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in a manner which in the
reasonable judgment of the Board of Directors of CCBG or of FABC would so
materially adversely affect the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, such Party would not, in its reasonable judgment, have
entered into this Agreement.
(d) Legal
Proceedings. No
court or governmental or regulatory authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions contemplated by this
Agreement.
(e) Registration
Statement. The
Registration Statement shall be effective under the 1933 Act, no stop orders
suspending the effectiveness of the Registration Statement shall have been
issued, no action, suit, proceeding or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be continuing, and all
necessary approvals under state securities Laws or the 1933 Act or 1934 Act
relating to the issuance or trading of the shares of CCBG Common Stock issuable
pursuant to the Mergers shall have been received.
(f) Share
Listing. The
shares of CCBG Common Stock issuable pursuant to the Mergers shall have been
approved for listing on the Nasdaq National Market.
(g) Tax
Matters. Each
Party shall have received a written opinion of its counsel, in form reasonably
satisfactory to such Party (the “Tax Opinion”), to the effect that (i) each
of the Mergers will constitute a reorganization within the meaning of Section
368(a) of the Code, (ii) the exchange in the Holding Company Merger of FABC
Common Stock for CCBG Common Stock will not give rise to gain or loss to the
shareholders of FABC with respect to such exchange (except to the extent of any
cash received), and (iii) neither FABC nor CCBG will recognize gain or loss as a
consequence of the Mergers (except for amounts resulting from any required
change in accounting methods and any income and deferred gain recognized
pursuant to Treasury regulations issued under Section 1502 of the Code). In
rendering such Tax Opinion, such counsel shall be entitled to rely upon
representations of officers of FABC and CCBG reasonably satisfactory in form and
substance to such counsel.
8.2 CONDITIONS
TO OBLIGATIONS OF CCBG. The
obligations of CCBG to perform this Agreement and consummate the Mergers and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by CCBG pursuant to Section
10.6(a):
(a) Representations
And Warranties. For
purposes of this Section 8.2(a), the accuracy of the representations and
warranties of FABC and First National set forth in this Agreement shall be
assessed as of the date of this Agreement and as of the Effective Time with the
same effect as though all such representations and warranties had been made on
and as of the Effective Time (provided that representations and warranties which
are confined to a specified date shall speak only as of such date). There shall
not exist inaccuracies in the representations and warranties of FABC and First
National set forth in this Agreement (including, without limitation, the
representations and warranties set forth in Sections 4.3, 4.20, 4.21, and 4.22)
such that the aggregate effect of such inaccuracies has, or is reasonably likely
to have, an FABC Material Adverse Effect; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to “Material” or “Material Adverse Effect” or to the “Knowledge” of
any Person shall be deemed not to include such qualifications.
(b) Performance
Of Agreements And Covenants. Each
and all of the agreements and covenants of FABC and First National to be
performed and complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Effective Time shall have been duly performed
and complied with.
(c) Certificates. FABC
and First National shall have delivered to CCBG (i) a certificate, dated as of
the Effective Time and signed on its behalf by its chief executive officer and
its chief financial officer, to the effect that the conditions set forth in
Section 8.1 as relates to FABC or First National and in Section 8.2(a) and
8.2(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by FABC’s and First National’s Board of Directors and shareholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby, all in such reasonable detail as CCBG and
its counsel shall request.
(d) Opinion
Of Counsel. CCBG
shall have received an opinion of Smith, Gambrell & Russell, LLP, counsel to
FABC and First National, dated as of the Closing, in form reasonably
satisfactory to CCBG, as to the matters set forth in Exhibit 7.
(e) Affiliates’
Agreements. CCBG
shall have received from each Affiliate of FABC the Affiliates Letter referred
to in Section 7.13.
(f) Net
Worth And Capital Requirements.
Immediately prior to the Effective Time, FABC shall have a consolidated minimum
net worth of at least $25,375,000. For purposes of calculating “net worth” for
this Section 8.2(f), “net worth” shall not be reduced by fees, costs and
expenses (a) incurred or paid by FABC in connection with the execution and
performance of this Agreement up to a maximum amount of $1,100,000 or (b)
incurred or paid at the request of CCBG; provided, however, “net worth” shall be
reduced for adjustments requested by CCBG for purposes of complying with GAAP
and adjustments for purposes of complying with Sections 7.23 or
7.24. For
purposes of this Section 8.2(f), “net worth” shall mean the sum of the amounts
set forth on the balance sheet as stockholders’ equity (including the par or
stated value of all outstanding capital stock, additional paid-in surplus,
retained earnings, treasury stock, and unrealized gains or losses on securities
available for sale) determined in accordance with GAAP.
(g) Director
and Voting Agreements. CCBG
shall have received from each director of FABC and First National the Director
and Voting Agreement set forth hereto at Exhibit 5.
(h) Claims
Letter. CCBG
shall have received from each director and officer of FABC and First National
the Claims Letter set forth hereto at Exhibit 8.
(i) Clearance
Certificate. FABC and
First National shall provide CCBG with a clearance certificate or similar
document(s) which may be required by any state taxing authority in order to
relieve CCBG of any obligation to withhold any portion of the consideration
under this Agreement.
(j) Executive
Employment Agreement. CCBG
shall have received from Jerry M. Smith an executed Executive Employment
Agreement in the form attached hereto as Exhibit 4.
(k) Letter
Agreement. CCBG
shall have received from Jerry M. Smith an executed letter agreement in the form
attached hereto as Exhibit 2.
8.3 CONDITIONS
TO OBLIGATIONS OF FABC AND FIRST NATIONAL. The
obligations of FABC and First National to perform this Agreement and consummate
the Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by FABC or First
National pursuant to Section 10.6(b):
(a) Representations
And Warranties. For
purposes of this Section 8.3(a), the accuracy of the representations and
warranties of CCBG set forth in this Agreement shall be assessed as of the date
of this Agreement and as of the Effective Time with the same effect as though
all such representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). There shall not exist
inaccuracies in the representations and warranties of CCBG set forth in this
Agreement such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a CCBG Material Adverse Effect; provided that, for
purposes of this sentence only, those representations and warranties which are
qualified by references to “Material” or “Material Adverse Effect” or to the
“Knowledge” of any Person shall be deemed not to include such
qualifications.
(b) Performance
Of Agreements And Covenants. Each
and all of the agreements and covenants of CCBG to be performed and complied
with pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied with in
all Material respects.
(c) Certificates. CCBG
shall have delivered to FABC and First National (i) a certificate, dated as of
the Effective Time and signed on its behalf by its chief executive officer and
its chief financial officer, to the effect that the conditions set forth in
Section 8.1 as relates to CCBG and in Section 8.3(a) and 8.3(b) have been
satisfied, and (ii) certified copies of resolutions duly adopted by CCBG’s Board
of Directors and shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as FABC and First National and their counsel shall
request.
(d) Opinion
Of Counsel. FABC
and First National shall have received an opinion of Gunster, Yoakley &
Stewart, P.A., counsel to CCBG, dated as of the Effective Time, in form
reasonably acceptable to FABC, as to the matters set forth in Exhibit
9.
(e) Agreement
relating to Executive Indexed Salary Continuation Plan. CCBG
shall have delivered to FABC and First National an agreement as contemplated in
Section VI(B) of the Executive Indexed Salary Continuation Plan, in form
reasonably acceptable to FABC and First National and their counsel.
ARTICLE
9
TERMINATION
9.1 TERMINATION.
Notwithstanding any other provision of this Agreement, and notwithstanding the
approval of this Agreement by the shareholders of FABC, this Agreement may be
terminated and the Mergers abandoned at any time prior to the Effective
Time:
(a) By mutual
consent of CCBG and FABC; or
(b) By either
Party (provided that the terminating Party is not then in Material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a breach by the other Party of any representation or
warranty contained in this Agreement which cannot be or has not been cured
within 30 days after the giving of written notice to the breaching Party of such
breach and which breach is reasonably likely, in the opinion of the
non-breaching Party, to have, individually or in the aggregate, an FABC Material
Adverse Effect or a CCBG Material Adverse Effect, as applicable, on the
breaching Party; or
(c) By either
Party (provided that the terminating Party is not then in Material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a Material breach by the other Party of any covenant
or agreement contained in this Agreement which cannot be or has not been cured
within 30 days after the giving of written notice to the breaching Party of such
breach; or
(d) By either
Party (provided that the terminating Party is not then in Material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event (i) any Consent of any Regulatory Authority required for
consummation of the Mergers and the other transactions contemplated
hereby
shall have been denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for appeal,
or (ii) the shareholders of FABC fail to vote their approval of the matters
relating to this Agreement and the transactions contemplated hereby at the
Shareholders’ Meeting where such matters were presented to such shareholders for
approval and voted upon; or
(e) By either
Party in the event that the Mergers shall not have been consummated by August
31, 2005, which date may be extended by the mutual consent of the Parties, if
the failure to consummate the transactions contemplated hereby on or before such
date is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 9.1(e); or
(f) By either
Party (provided that the terminating Party is not then in Material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event that any of the conditions precedent to the obligations
of such Party to consummate the Mergers cannot be satisfied or fulfilled by the
date specified in Section 9.1(e); or
(g) By CCBG,
in the event that the Board of Directors of FABC or First National shall have
failed to reaffirm its approval of the Mergers and the transactions contemplated
by this Agreement (to the exclusion of any other Acquisition Proposal), or shall
have resolved not to reaffirm the Mergers, or shall have affirmed, recommended
or authorized entering into any other Acquisition Proposal or other transaction
involving a merger, share exchange, consolidation or transfer of substantially
all of the Assets of FABC; or
(h) By CCBG,
in the event of an Adverse Finding and, if time is granted by CCBG to cure such
Adverse Finding pursuant to Section 7.6(c), such Adverse Finding is not cured to
the satisfaction of CCBG within the time specified in CCBG’s notice of such
Adverse Finding;
or
(i) By FABC,
pursuant to Section 9.3; or
(j) By CCBG,
pursuant to Section 2.1(e);
or
(k) By FABC,
at any time during the two-day period commencing at the close of trading on the
Determination Date, if both (i) the
Average Closing Price is less than or equal to $34, and (ii) the quotient
obtained by dividing the Average Closing Price by 40 is less than the number
obtained by subtracting 0.15 from the quotient obtained by dividing (x) the
Index Price at the close of trading on the Determination Date by (y) the Index
Price on the Starting Date, subject to the following three sentences. If FABC
elects to exercise its termination right pursuant to the immediately preceding
sentence, then it shall give prompt written notice to CCBG; provided that such
notice of election to terminate may be withdrawn at any time within the
aforementioned two-day period. During the three-day period commencing with its
receipt of such notice, CCBG shall have the option of adjusting the Share
Exchange Ratio to a number equal to a quotient (rounded to the nearest
one-ten-thousandth) obtained by dividing (i) the product obtained by multiplying
(x) $34 and (y) the Share Exchange Ratio (as then in effect) by (ii) the Average
Closing Price. If CCBG makes such an election within such three-day period it
shall give prompt written notice to FABC of such election and the revised
Exchange Ratio, whereupon no termination shall have occurred pursuant to this
Section 9.1(k) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to “Exchange
Ratio”
shall thereafter be deemed to refer to the Exchange Ratio as adjusted pursuant
to this Section 9.1(k).
If any
company belonging to the Index Group or CCBG declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction between the Starting Date and the Determination
Date, the prices for the common stock of such company or CCBG shall be
appropriately adjusted for the purposes of applying this Section
9.1(k).
9.2 EFFECT
OF TERMINATION. In the
event of the termination and abandonment of this Agreement pursuant to Section
9.1, this Agreement shall become void and have no effect, except that (i) the
provisions of this Section 9.2 and Article 10 and Sections 7.6(d) and 7.7 shall
survive any such termination and abandonment, and (ii) a termination pursuant to
Sections 9.1(b), 9.1(c) or 9.1(f) shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation, warranty, covenant,
or agreement giving rise to such termination.
9.3 ALTERNATE
TRANSACTION. Nothing
contained in this Agreement shall be deemed to prohibit any director or officer
of FABC from fulfilling his or her fiduciary duties to FABC shareholders or from
taking any action required by Law. However, in addition to any other payments
required by this Agreement, in the event that this Agreement is terminated as a
result of FABC or the holders of at least a majority of the shares of FABC
Common Stock entering into an agreement with respect to the merger of FABC with
a party other than CCBG or the acquisition of a majority of the outstanding
shares of FABC Common Stock by any party other than CCBG, or is terminated in
anticipation of any such agreement or acquisition, then, in either event, FABC
shall immediately pay CCBG, by wire transfer, $2,320,000 in full satisfaction of
CCBG’s losses and damages resulting from such termination. FABC agrees that
$2,320,000 is reasonable under the circumstances, that it would be impossible to
exactly determine CCBG’s actual damages as a result of such a termination and
that CCBG’s actual damages resulting from the loss of the transaction are in
excess of $2,320,000.
9.4 NON-SURVIVAL
OF REPRESENTATIONS AND COVENANTS. The
respective representations, warranties, obligations, covenants, and agreements
of the Parties shall not survive the Effective Time except this Section 9.4 and
Articles 1, 2, 3, 4, and 10 and Sections 6.6, 7.7, 7.13, 7.14, 7.16, and
9.3;
provided, however, that the representations and warranties contained in ARTICLE
4 shall not survive the Effective Time beyond the third anniversary of the
Closing Date.
ARTICLE
10
MISCELLANEOUS
10.1 DEFINITIONS.
(a) Except as
otherwise provided herein, the capitalized terms set forth below shall have the
following meanings:
“1933
ACT” shall mean the Securities Act of 1933, as amended.
“1934
ACT” shall mean the Securities Exchange Act of 1934, as amended.
“ACQUISITION
PROPOSAL” with respect to a Party shall mean any tender offer or exchange offer
or any proposal for a merger, acquisition of all of the stock or assets of, or
other business combination involving the acquisition of such Party
or any of
its Subsidiaries or the acquisition of a substantial equity interest in, or a
substantial portion of the assets of, such Party or any of its
Subsidiaries.
“ADJUSTED
PURCHASE PRICE” shall
mean the Purchase Price reduced by the Audit Adjustments.
“ADJUSTED
PURCHASE PRICE PER SHARE” shall
mean the quotient obtained by dividing (i) the Adjusted Purchase Price by (ii)
the number of shares of FABC Common Stock issued outstanding immediately prior
to the Effective Time, excluding shares held by any FABC Entity or any CCBG
Entity, in each case other than in a fiduciary capacity or as a result of debts
previously contracted.
“AFFILIATE”
of a Person shall mean: (i) any other Person directly, or indirectly through one
or more intermediaries, controlling, controlled by or under common control with
such Person; (ii) any executive officer, director, partner, employer, or direct
or indirect beneficial owner of any 10% or greater equity or voting interest of
such Person; or (iii) any other Person for which a Person described in clause
(ii) acts in any such capacity.
“AGREEMENT”
shall mean this Agreement and Plan of Merger, including the Exhibits delivered
pursuant hereto and incorporated herein by reference.
“ALACHUA
401(K) PLAN LIABILITIES” shall
mean all Liabilities relating to the EPCRS Application, all failures described
in Section 4.15 of the FABC Disclosure Memorandum, and any Liabilities,
including, but not limited to, excise taxes relating to the Alachua 401(k)
Plan.
“ARTICLES
OF MERGER” shall mean the Articles of Merger to be executed by CCBG and filed
with the Secretary of State of the State of Florida relating to the Holding
Company Merger as contemplated by Section 1.1.
“ASSETS”
of a Person shall mean all of the assets, properties, businesses and rights of
such Person of every kind, nature, character and description, whether real,
personal or mixed, tangible or intangible, accrued or contingent, or otherwise
relating to or utilized in such Person’s business, directly or indirectly, in
whole or in part, whether or not carried on the books and records of such
Person, and whether or not owned in the name of such Person or any Affiliate of
such Person and wherever located.
“AVERAGE
CLOSING PRICE” shall mean the average of the daily closing sales prices of one
share of CCBG Common Stock as reported on the Nasdaq National Market (as
reported by The
Wall Street Journal or, if
not reported thereby, any other authoritative source selected by CCBG) for the
twenty (20) consecutive full trading days in which such shares are traded on the
Nasdaq National Market ending at the close of trading on the Determination
Date.
“BHC ACT”
shall mean the federal Bank Holding Company Act of 1956, as
amended.
“CCB”
shall mean Capital City Bank, a Florida chartered commercial bank and a CCBG
Subsidiary.
“CCBG”
shall mean Capital City Bank Group, Inc., a Florida corporation.
“CCBG
CAPITAL STOCK” shall mean, collectively, the CCBG Common Stock, the CCBG
Preferred Stock and any other class or series of capital stock of
CCBG.
“CCBG
COMMON STOCK” shall mean the common stock of CCBG, $.01 par value per
share.
“CCBG
DISCLOSURE MEMORANDUM” shall mean the written information entitled “Capital City
Bank Group, Inc. Disclosure Memorandum” delivered prior to the date of this
Agreement to FABC describing in reasonable detail the matters contained therein
and, with respect to each disclosure made therein, specifically referencing each
Section of this Agreement under which such disclosure is being made. Information
disclosed with respect to one Section shall not be deemed to be disclosed for
purposes of any other Section not specifically referenced with respect
thereto.
“CCBG
ENTITIES” shall mean, collectively, CCBG and all CCBG Subsidiaries.
“CCBG
FINANCIAL STATEMENTS” shall mean (i) the consolidated statements of condition
(including related notes and schedules, if any) of CCBG as of December 31,
2003 and 2002, and the related statements of income, changes in shareholders’
equity, and cash flows (including related notes and schedules, if any) for each
of the three fiscal years ended December 31, 2003, 2002 and 2001, as filed
by CCBG in SEC Documents, and (ii) the consolidated statements of condition and
balance sheets of CCBG (including related notes and schedules, if any) and
related statements of income, changes in shareholders’ equity, and cash flows
(including related notes and schedules, if any) included in SEC Documents filed
with respect to periods ended subsequent to December 31, 2003.
“CCBG
MATERIAL ADVERSE EFFECT” shall mean an event, change or occurrence which,
individually or together with any other event, change or occurrence, has a
material adverse impact on (i) the financial position, business, or results of
operations of CCBG and its Subsidiaries, taken as a whole, or (ii) the ability
of CCBG to perform its obligations under this Agreement or to consummate the
Mergers or the other transactions contemplated by this Agreement, including
without limitation the tax-free reorganization status of the Mergers; provided
that “Material Adverse Effect” shall not be deemed to include the impact of (a)
changes in banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in generally accepted
accounting principles or regulatory accounting principles generally applicable
to banks and their holding companies, (c) actions and omissions of CCBG (or any
of its Subsidiaries) taken with the prior informed written Consent of FABC in
contemplation of the transactions contemplated hereby, and (d) the direct
effects of compliance with this Agreement on the operating performance of CCBG,
including expenses incurred by CCBG in consummating the transactions
contemplated by this Agreement.
“CCBG
PREFERRED STOCK” shall mean the preferred stock of CCBG, $.01 par value per
share.
“CCBG
STOCK PLANS” shall mean the existing stock-based plans of CCBG designated as
follows: (i) Associate Incentive Plan, (ii) Associate Stock Purchase
Plan, (iii) Director Stock Purchase Plan and (iv) Dividend Reinvestment
Plan.
“CCBG
SUBSIDIARIES” shall mean the Subsidiaries of CCBG, which shall include the CCBG
Subsidiaries described in Section 5.4 and any corporation, bank, savings
association, or other organization acquired as a Subsidiary of CCBG in the
future and held as a Subsidiary by CCBG at the Effective Time.
“CLOSING
DATE” shall mean the date on which the Closing occurs.
“CODE” shall
mean the Internal Revenue Code of 1986. All citations to the Code, or the
Treasury Regulations promulgated thereunder, shall include all amendments
thereto and any substitute and successor provisions. All section references to
the Code (or Treasury Regulations) shall include all similar provisions under
the applicable state, local or foreign tax law.
“CONFIDENTIALITY
AGREEMENT” shall mean that certain Confidentiality Agreement, dated July 26,
2004, between SunTrust Robinson Humphrey, on behalf of FABC and
CCBG.
“CONSENT”
shall mean any consent, approval, authorization, clearance, exemption, waiver,
or similar affirmation by any Person pursuant to any Contract, Law, Order, or
Permit.
“CONTRACT”
shall mean any written or oral agreement, arrangement, authorization,
commitment, contract, indenture, instrument, lease, obligation, plan, practice,
restriction, understanding, or undertaking of any kind or character, or other
document to which any Person is a party or that is binding on any Person or its
capital stock, Assets or business.
“DEFAULT”
shall mean (i) any breach or violation of, default under, contravention of, or
conflict with, any Contract, Law, Order, or Permit, (ii) any occurrence of any
event that with the passage of time or the giving of notice or both would
constitute a breach or violation of, default under, contravention of, or
conflict with, any Contract, Law, Order, or Permit, or (iii) any occurrence of
any event that with or without the passage of time or the giving of notice would
give rise to a right of any Person to exercise any remedy or obtain any relief
under, terminate or revoke, suspend, cancel, or modify or change the current
terms of, or renegotiate, or to accelerate the maturity or performance of, or to
increase or impose any Liability under, any Contract, Law, Order, or
Permit.
“DEPOSIT
ACCOUNTS” means the deposit accounts held at FABC, the balances which are
included in the Deposits or would be so included if the Deposit Account had a
positive balance.
“DEPOSITS”
means all deposits (as defined in 12 U.S.C. Section 1813(I)) held by FABC as of
the Close of Business on the Closing Date.
“DETERMINATION
DATE” shall mean the fifth full trading day prior to the day on which the
Effective Time occurs.
“ENVIRONMENTAL
LAWS” shall mean any and all Laws (which were formerly effective, are effective
currently, or are effective after the Effective Time, including any amendments
thereto) relating in any way to protection or regulation of public health, human
health, or the environment, including, but not limited to, ambient air, indoor
air, surface water, ground water, other waters, land surface, subsurface strata,
or occupational safety and health, including, but not limited to, those Laws
which are administered, interpreted, or enforced by the United States
Environmental Protection Agency or state or local governmental agencies or
authorities with jurisdiction over, and including common law in respect of,
protection or regulation of public health, human health, or the environment,
also including, but not limited to, the Comprehensive Environmental Response
Compensation and Liability Act, as amended, 42 U.S.C. § 9601 et seq. (“CERCLA”),
and the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901 et
seq. (“RCRA”), and their state equivalents or analogs, and including, but
limited to, all other Laws relating to the emission, discharge, disposal, spill,
release, or threatened release of any Hazardous Material, or otherwise relating
to the manufacture, processing,
distribution,
use, treatment, storage, disposal, transport, or handling of any Hazardous
Material.
“EQUITY
RIGHTS” shall mean all arrangements, calls, commitments, Contracts, options,
rights to subscribe to, scrip, understandings, warrants, or other binding
obligations of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of a Person or
by which a Person is or may be bound to issue additional shares of its capital
stock or other Equity Rights.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
“EXHIBITS”
1 through 9, inclusive, shall mean the Exhibits so marked, copies of which are
attached to this Agreement. Such Exhibits are hereby incorporated by reference
herein and made a part hereof, and may be referred to in this Agreement and any
other related instrument or document without being attached hereto.
“FABC”
shall mean First Alachua Banking Corporation, a Florida
corporation.
“FABC
AUDITED FINANCIAL STATEMENTS” shall mean the consolidated statement of condition
(including related notes and schedules, if any) of FABC as of September 30,
2004, and the related statements of income, changes in shareholders’ equity, and
cash flows (including related notes and schedules, if any) for the nine-month
period ended September 30, 2004 that shall be audited pursuant to Section
7.23.
“FABC
CAPITAL
STOCK” shall
mean, collectively, the FABC Common Stock and any other class or series of
capital stock of FABC.
“FABC
COMMON STOCK” shall mean (i) Class A Common Stock of FABC, $0.10 par value per
share and (ii) Class B Common Stock of FABC, $0.10 par value per
share.
“FABC
DISCLOSURE MEMORANDUM” shall mean the written information entitled “First
Alachua Banking Corporation Disclosure Memorandum” delivered prior to the date
of this Agreement to CCBG describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is being
made. Information disclosed with respect to one Section shall not be deemed to
be disclosed for purposes of any other Section not specifically referenced with
respect thereto.
“FABC
ENTITIES” shall mean, collectively, FABC and all FABC Subsidiaries.
“FABC
FINANCIAL STATEMENTS” shall
mean (i) for the years ended December 31, 2003, 2002 and 2001, FABC’s balance
sheets, income statements and statements of changes in stockholders’ equity
(including related notes and schedules, if any), (ii) for the years ended
December 31, 2003, 2002 and 2001, the balance sheet, income statement,
reconciliation of equity, reconciliation of reserve for possible loan losses,
and Schedule RC-C-loans and lease financing receivables (including related notes
and schedules, if any), with respect to First National, all on an unaudited
basis, and (iii) the balance sheets, income statements and statements of changes
in stockholders’ equity (including related notes and schedules, if any) for FABC
on a consolidated basis, and for First National, for periods ended subsequent to
December 31, 2003.
“FABC
MATERIAL ADVERSE EFFECT” shall mean an event, change or occurrence which,
individually or together with any other event, change or occurrence, has a
material
adverse
impact on (i) the financial position, business, or results of operations of FABC
and its Subsidiaries, taken as a whole, or (ii) the ability of FABC to perform
its obligations under this Agreement or to consummate the Mergers or the other
transactions contemplated by this Agreement, provided that “Material Adverse
Effect” shall not be deemed to include the impact of (a) changes in banking and
similar Laws of general applicability or interpretations thereof by courts or
governmental authorities, (b) changes in generally accepted accounting
principles or regulatory accounting principles generally applicable to banks and
their holding companies, (c) actions and omissions of FABC (or any of its
Subsidiaries) taken with the prior informed written Consent of CCBG in
contemplation of the transactions contemplated hereby, and (d) the direct
effects of compliance with this Agreement on the operating performance of FABC,
including expenses incurred by FABC in consummating the transactions
contemplated by this Agreement.
“FABC
STOCK PLANS” shall mean all stock-based plans of FABC.
“FABC
SUBSIDIARIES” shall mean the Subsidiaries of FABC, which shall include the FABC
Subsidiaries described in Section 4.4 and any corporation, bank, savings
association, or other organization acquired as a Subsidiary of FABC in the
future and held as a Subsidiary by FABC at the Effective Time.
“FBCA”
shall mean the Florida Business Corporation Act, as amended.
“FIRST
NATIONAL” shall
mean the First National Bank of Alachua, a national banking association and an
FABC Subsidiary.
“FIRST
NATIONAL CAPITAL STOCK” shall
mean, collectively, the First National Common Stock and any other class or
series of capital stock of First National.
“FIRST
NATIONAL COMMON STOCK” shall mean the common stock of First National, $5.00 par
value per share.
“GAAP”
shall mean generally accepted accounting principles as in effect in the United
States of America at the time of the preparation of the subject financial
statement, consistently applied during the periods involved.
“HAZARDOUS
MATERIAL” shall mean (i) any hazardous substance, hazardous material, hazardous
waste, regulated substance, or toxic substance, as those terms have been, are
currently, or after the Effective Time are, regulated, or defined, by any
applicable Environmental Laws, and (ii) any other chemical, pollutant,
constituent, contaminant, substance, material, waste, petroleum, petroleum
product, or oil, or similar or related items, that have been, are currently, or
after the Effective Time are, regulated, or defined, by any applicable
Environmental Laws. The term “HAZARDOUS MATERIAL” shall specifically include
(but is not limited to) asbestos or lead-based paint requiring abatement,
removal, or encapsulation, or otherwise regulated, pursuant to the requirements
of governmental agencies or authorities.
“HSR ACT”
shall mean Section 7A of the Clayton Act, as added by Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder.
“INDEX
GROUP” means the group of the 22 bank holding companies listed below, the common
stock of all of which shall be publicly traded and as to which there shall not
have been, since the Starting Date and before the Determination Date, an
announcement of a proposal for such company to be acquired or for such company
to acquire another company or companies in transactions with a value exceeding
25% of
the
acquirer’s market capitalization as of the Starting Date. In the event that the
common stock of any such company ceases to be publicly traded or any such
announcement is made with respect to any such company, such company will be
removed from the Index Group, and the weights (which have been determined based
on the number of outstanding shares of common stock) redistributed
proportionately for purposes of determining the Index Price. The 22 bank holding
companies are as follows:
Bank
Holding Company |
Ticker |
Weighting |
|
|
|
Sterling
Bancshares, Inc. |
SBIB |
11.31 |
United
Community Banks, Inc. |
UCBI |
9.13 |
First
Charter Corporation |
FCTR |
7.53 |
Texas
Capital Bancshares, Inc. |
TCBI |
6.38 |
Prosperity
Bancshares, Inc. |
PRSP |
5.64 |
Main
Street Banks, Inc. |
MSBK |
5.43 |
WesBanco,
Inc. |
WSBC |
5.24 |
Alabama
National BanCorporation |
ALAB |
4.28 |
City
Holding Company |
CHCO |
4.17 |
Bank
of the Ozarks, Inc. |
OZRK |
4.14 |
First
Financial Bankshares, Inc. |
FFIN |
3.90 |
Seacoast
Banking Corporation of Florida |
SBCF |
3.89 |
Simmons
First National Corporation |
SFNC |
3.68 |
Sandy
Spring Bancorp, Inc. |
SASR |
3.65 |
First
Bancorp |
FBNC |
3.54 |
Community
Trust Bancorp, Inc. |
CTBI |
3.39 |
GB&T
Bancshares, Inc. |
GBTB |
2.89 |
First
Community Bancshares, Inc. |
FCBC |
2.83 |
Virginia
Commerce Bancorp, Inc. |
VCBI |
2.78 |
Peoples
Holding Company |
PHC |
2.27 |
Union
Bankshares Corporation |
UBSH |
2.19 |
IberiaBank
Corporation |
IBKC |
1.73 |
“INDEX
PRICE” on a given date means the weighted average (weighted in accordance with
the factors listed under the definition of “Index Group”) of the closing prices
of the companies comprising the Index Group.
“INTELLECTUAL
PROPERTY” shall mean: (a) all inventions (whether patentable or un-patentable
and whether or not reduced to practice), all rights to all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
re-issuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof; (b) all trademarks, service marks, trade dress, logos,
trade names, corporate names and domain names together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith; (c) all copyrightable works (including, but not limited
to, training materials and instruction manuals), all copyrights, and all
applications, registrations, and renewals in connection therewith; (d) all trade
secrets and confidential business information (including ideas, know-how,
formulae, compositions, techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
business methods and business and marketing plans and proposals); (e) all
computer software in source or object code (including data and related
documentation); (f) all other proprietary rights relative to any of the
foregoing;
(g) all
copies and tangible embodiments of the forgoing (in whatever form or medium);
and (h) all licenses to any of the foregoing.
“KNOWLEDGE”
as used with respect to a Person (including references to such Person being
aware of a particular matter) shall mean those facts that are known or should
reasonably have been known after due inquiry by the chairman, president, chief
financial officer, chief accounting officer, chief operating officer, chief
credit officer, general counsel, any assistant or deputy general counsel, or any
senior or executive vice president of such Person and the knowledge of any such
persons obtained or which would have been obtained from a reasonable
investigation.
“LAW”
shall mean any code, law (including common law), ordinance, regulation,
reporting or licensing requirement, rule, or statute applicable to a Person or
its Assets, Liabilities, or business, including those promulgated, interpreted
or enforced by any Regulatory Authority.
“LIABILITY”
shall mean any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, cost or expense (including costs of
investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
“LIEN”
shall mean any conditional sale agreement, default of title, easement,
encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge,
reservation, restriction, security interest, title retention or other security
arrangement, or any adverse right or interest, charge, or claim of any nature
whatsoever of, on, or with respect to any property or property interest, other
than (i) Liens for current property Taxes not yet due and payable, (ii) for
depository institution Subsidiaries of a Party, pledges to secure deposits and
other Liens incurred in the ordinary course of the banking business, (iii) Liens
which do not materially impair the use of or title to the Assets subject to such
Lien, and which are disclosed in Section 10.1 of the FABC Disclosure Memorandum
or the CCBG Disclosure Memorandum, as applicable.
“LITIGATION”
shall mean any action, arbitration, cause of action, claim, complaint, criminal
prosecution, governmental or other examination or investigation, hearing,
administrative or other proceeding, including without limitation, any actual,
pending, or threatened condemnation, relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement, but shall not include regular, periodic
examinations of depository institutions and their Affiliates by Regulatory
Authorities.
“MATERIAL”
for purposes of this Agreement shall be determined in light of the facts and
circumstances of the matter in question; provided that any specific monetary
amount stated in this Agreement shall determine materiality in that
instance.
“NASD”
shall mean the National Association of Securities Dealers, Inc.
“NASDAQ
NATIONAL MARKET” shall mean the National Market System of the National
Association of Securities Dealers Automated Quotations System.
“OPERATING
PROPERTY” shall mean any property owned, leased, managed
or
operated by the Party in question or by any of its Subsidiaries and, where
required by the
context,
includes the owner or operator of such property, but only with respect to such
property.
“ORDER”
shall mean any administrative decision or award, decree, injunction, judgment,
order, quasi- judicial decision or award, ruling, or writ of any federal, state,
local or foreign or other court, arbitrator, mediator, tribunal, administrative
agency, or Regulatory Authority.
“PARTICIPATION
FACILITY” shall mean any facility or property in which such
Party or Subsidiary holds a security interest (including an interest in a
fiduciary capacity) and,
where required by the context, said term means the owner or operator of such
facility or property, but only with respect to such facility or
property.
“PARTY”
shall mean either FABC and First National, collectively, or CCBG, and “PARTIES”
shall mean FABC, First National, and CCBG.
“PERMIT”
shall mean any federal, state, local, and foreign governmental approval,
authorization, certificate, easement, filing, franchise, license, notice,
permit, or right to which any Person is a party or that is or may be binding
upon or inure to the benefit of any Person or its securities, Assets, or
business.
“PERSON”
shall mean a natural person or any legal, commercial or governmental entity,
such as, but not limited to, a corporation, general partnership, joint venture,
limited partnership, limited liability company, trust, business association,
group acting in concert, or any person acting in a representative
capacity.
“PROXY
STATEMENT” shall mean the proxy statement used by FABC to solicit the approval
of its shareholders of the transactions contemplated by this Agreement, which
shall include the prospectus of CCBG relating to the issuance of the CCBG Common
Stock to holders of FABC Common Stock.
“REGISTRATION
STATEMENT” shall mean the Registration Statement on Form S-4, or other
appropriate form, including any pre-effective or post-effective amendments or
supplements thereto, filed with the SEC by CCBG under the 1933 Act with respect
to the shares of CCBG Common Stock to be issued to the shareholders of FABC in
connection with the transactions contemplated by this Agreement.
“REGULATORY
AUTHORITIES” shall mean, collectively, the SEC, the NASD, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, the Florida Department of Financial
Services and all other federal, state, county, local or other governmental or
regulatory agencies, authorities (including self- regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over the
Parties and their respective Subsidiaries.
“REPRESENTATIVE”
shall mean any investment banker, financial advisor, attorney, accountant,
consultant, or other representative engaged by a Person.
“RETURNS” shall
mean all returns, declarations, reports, statements and other documents required
to be filed in respect of Taxes, and any claims for refunds of Taxes, including
any amendments or supplements to any of the foregoing.
“SEC
DOCUMENTS” shall mean all forms, proxy statements, registration statements,
reports, schedules, and other documents filed, or required to be filed,
by a
Party or any of its Subsidiaries with any Regulatory Authority pursuant to the
Securities Laws.
“SECURITIES
LAWS” shall mean the 1933 Act, the 1934 Act, the Investment Company Act of 1940,
as amended, the Investment Advisors Act of 1940, as amended, the Trust Indenture
Act of 1939, as amended, and the rules and regulations of any Regulatory
Authority promulgated thereunder.
“SHAREHOLDERS’
MEETING” shall mean the meeting of the shareholders of FABC to be held pursuant
to Section 7.1, including any adjournment or adjournments thereof.
“SIGNIFICANT
SUBSIDIARY” shall mean any present or future consolidated Subsidiary of the
Party in question, the assets of which constitute ten percent (10%) or more of
the consolidated assets of such Party as reflected on such Party’s consolidated
statement of condition prepared in accordance with GAAP.
“STARTING
DATE” shall mean the full trading day, immediately prior to the day on which the
Parties execute this Agreement, on which the common stock of all of the bank
holding companies comprising the Index Group are traded.
“SUBSIDIARIES”
shall mean all those corporations, associations, or other business entities of
which the entity in question either (i) owns or controls 50% or more of the
outstanding equity securities either directly or through an unbroken chain of
entities as to each of which 50% or more of the outstanding equity securities is
owned directly or indirectly by its parent (provided, there shall not be
included any such entity the equity securities of which are owned or controlled
in a fiduciary capacity), (ii) in the case of partnerships, serves as a general
partner, (iii) in the case of a limited liability company, serves as a managing
member, or (iv) otherwise has the ability to elect a majority of the directors,
trustees or managing members thereof.
“SURVIVING
CORPORATION” shall mean CCBG as the surviving corporation resulting from the
Holding Company Merger.
“TAX” or
“TAXES” shall mean all federal, state, local, foreign and other taxes,
assessments or other governmental charges, including, without limitation, (i)
income, estimated income, business, occupation, franchise, property, sales, use,
excise, employment, unemployment, payroll, social security, ad valorem,
transfer, gains, profits, capital stock, license, gross receipts, stamp, real
estate, severance and withholding taxes, and any fee assessment or other charge
in the nature or in lieu of any tax and including any transferee or secondary
liability in respect of any tax (imposed by Law, agreement or otherwise) and
(ii) interest, penalties and additions in connection therewith, in each case,
for which FABC is or may be liable (including as a result of the application of
Treas. Reg. § 1.1502-6).
(b) The terms
set forth below shall have the meanings ascribed thereto in the referenced
sections:
Adverse
Finding |
Section
7.6(c) |
Alachua
401(k) Plan |
Section
7.14(c) |
Allowance |
Section
4.9 |
Audit
Adjustments |
Section
2.1(d) |
Auditor |
Section
7.23 |
Bank
Merger |
Preamble |
Bank
Plan |
Section
1.2 |
Certificates |
Section
3.1 |
CCBG
SEC Reports |
Section
5.5(a) |
CCBG
Stock Multiple |
Section
2.1(c) |
Closing |
Section
1.3 |
COBRA |
Section
4.15(k) |
Executive
Employment Agreement |
Section
7.14 |
Effective
Time |
Section
1.4 |
Environmental
Survey |
Section
7.20 |
EPCRS
Application |
Section
7.15 |
ERISA
Affiliate |
Section
4.15(d) |
Exchange
Agent |
Section
3.1 |
Executive
Indexed Salary Continuation Plan |
Section
7.14(c) |
FABC
Benefit Plans |
Section
4.15(a) |
FABC
Contracts |
Section
4.16 |
FABC
ERISA Plan |
Section
4.15(a) |
FABC
Pension Plan |
Section
4.15(a) |
HIPAA |
Section
4.15(k) |
Holding
Company Merger |
Preamble |
Indemnified
Party |
Section
7.16 |
IRS |
Section
4.15(a) |
Purchase
Price |
Section
2.1(b) |
Material
Defect |
Section
7.20 |
Material
Defect Notice |
Section
7.20 |
Mergers |
Preamble |
Notices |
Section
4.12(d) |
Participants |
Section
4.15(a) |
PBGC |
Section
4.15(e) |
Property
Examination |
Section
7.20 |
Real
Property |
Section
4.10(f) |
Share
Exchange Ratio |
Section
2.1(c) |
Takeover
Laws |
Section
4.21 |
Tax
Opinion |
Section
8.1(g) |
(c) Any
singular term in this Agreement shall be deemed to include the plural, and any
plural term the singular. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed followed by the
words “without limitation.”
10.2 EXPENSES. Except
as otherwise provided in this Section 10.2, each of the Parties shall bear and
pay all direct costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including filing, registration and
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel, except that
CCBG shall bear and pay the filing fees payable in connection with the
Registration Statement and the Proxy Statement and the printing costs incurred
in connection with the printing of the Registration Statement and the Proxy
Statement shall be borne equally by CCBG and FABC.
10.3 BROKERS
AND FINDERS. Except
for SunTrust Robinson Humphrey as to FABC and First National and except for
McConnell, Budd & Romano, Inc. as to CCBG, each of the Parties represents
and warrants that neither it nor any of its officers, directors, employees, or
Affiliates has employed any broker or finder or incurred any Liability for any
financial advisory fees, investment bankers’ fees, brokerage fees, commissions,
or finders’ fees in connection with this Agreement or the transactions
contemplated hereby. In the event of a claim by any broker or finder based upon
his or its representing or being retained by or allegedly representing or being
retained by FABC or by CCBG, each of FABC and CCBG, as the case may be, agrees
to indemnify
and hold
the other Party harmless of and from any Liability in respect of any such
claim.
10.4 ENTIRE
AGREEMENT. Except
as otherwise expressly provided herein, this Agreement (including the documents
and instruments referred to herein) constitutes the entire agreement between the
Parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereto, written or oral
(except, as to Section 7.6(b), for the Confidentiality Agreement). Nothing in
this Agreement expressed or implied, is intended to confer upon any Person,
other than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
provided in Sections 7.14 and 7.16.
10.5 AMENDMENTS. To the
extent permitted by Law, this Agreement may be amended by a subsequent writing
signed by each of the Parties upon the approval of each of the Parties, whether
before or after shareholder approval of this Agreement has been obtained;
provided, that after any such approval by the holders of FABC Common Stock,
there shall be made no amendment that reduces or modifies in any Material
respect the consideration to be received by holders of FABC Common Stock; and
further provided, that the provisions of this Agreement relating to the manner
or basis in which shares of FABC Common Stock will be exchanged for shares of
CCBG Common Stock shall not be amended after the Shareholders’ Meeting in a
manner adverse to the holders of CCBG Common Stock without any requisite
approval of the holders of the issued and outstanding shares of CCBG Common
Stock entitled to vote thereon.
(a) Prior to
or at the Effective Time, CCBG, acting through its Board of Directors, chief
executive officer or other authorized officer, shall have the right to waive any
Default in the performance of any term of this Agreement by FABC, to waive or
extend the time for the compliance or fulfillment by FABC of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of CCBG under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly authorized officer
of CCBG.
(b) Prior to
or at the Effective Time, FABC, acting through its Board of Directors, chief
executive officer or other authorized officer, shall have the right to waive any
Default in the performance of any term of this Agreement by CCBG, to waive or
extend the time for the compliance or fulfillment by CCBG of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of FABC under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly authorized officer
of FABC.
(c) The
failure of any Party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such Party at a later
time to enforce the same or any other provision of this Agreement. No waiver of
any condition or of the breach of any term contained in this Agreement in one or
more instances shall be deemed to be or construed as a further or continuing
waiver of such condition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement.
10.7 ASSIGNMENT. Except
as expressly contemplated hereby, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior
written
consent of the other Party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the Parties
and their respective successors and assigns.
10.8 NOTICES. All
notices, requests, consents and other communications required or permitted under
this Agreement shall be in writing and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, transmitted by fax,
or mailed by registered or certified mail (postage prepaid), return receipt
requested, addressed to:
FABC: |
First
Alachua Banking Corporation15000 N.W. 140th
Street
Alachua,
Florida 32615
P.O.
Box 219
Alachua,
Florida 32616
Facsimile
Number: (386) 462-6689
Attention:
Jerry M. Smith or Marjorie Drummond
|
First
National: |
First
National Bank of Alachua15000 N.W. 140th
Street
Alachua,
Florida 32615
P.O.
Box 219
Alachua,
Florida 32616
Facsimile
Number: (386) 462-6689
Attention:
Jerry M. Smith or Marjorie Drummond |
Copy
to FABC and First National Counsel: |
Smith,
Gambrell & Russell, LLP1230 Peachtree Street, N.E., Suite
3100
Atlanta,
Georgia 30309-3592
Facsimile
Number: (404) 685-7058
Attn:
Robert C. Schwartz, Esq.
|
CCBG: |
Capital
City Bank Group, Inc.
217
North Monroe Street
Tallahassee,
Florida 33301
Facsimile
Number: (850) 878-9150
Attention:
J. Kimbrough Davis
|
Copy
to Counsel: |
Gunster,
Yoakley & Stewart, P.A.
500
East Broward Boulevard, Suite 1400
Fort
Lauderdale, Florida 33394
Facsimile
Number: (954) 523-1722
Attention:
Gregory K. Bader, Esq. |
or to
such other address as any party may designate by notice complying with the terms
of this Section. Each such notice shall be deemed delivered (a) on the date
delivered, if by messenger or courier service; (b) on the date of the
confirmation of receipt, if by fax; and (c) either upon the date of receipt
or refusal of delivery, if mailed.
10.9 GOVERNING
LAW. This
Agreement shall be governed by and construed in accordance with the Laws of the
State of Florida, without regard to any applicable conflicts of
Laws.
10.10 COUNTERPARTS. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument.
10.11 CAPTIONS;
ARTICLES AND SECTIONS. The
captions contained in this Agreement are for reference purposes only and are not
part of this Agreement. Unless otherwise indicated, all references to particular
Articles or Sections shall mean and refer to the referenced Articles and
Sections of this Agreement.
10.12 INTERPRETATIONS. Neither
this Agreement nor any uncertainty or ambiguity herein shall be construed or
resolved against any party, whether under any rule of construction or otherwise.
No party to this Agreement shall be considered the draftsman. The parties
acknowledge and agree that this Agreement has been reviewed, negotiated, and
accepted by all parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as fairly to
accomplish the purposes and intentions of all parties hereto.
10.13 ENFORCEMENT
OF AGREEMENT. The
Parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with its
specific terms or were otherwise breached. It is accordingly agreed that the
Parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in
equity.
10.14 ENFORCEMENT
COSTS. If any
civil action, arbitration or other legal proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, Default
or misrepresentation in connection with any provision of this Agreement, the
successful or prevailing party or parties shall be entitled to recover
reasonable attorneys’ fees, court costs, sales and use taxes and all expenses
even if not taxable as court costs (including, without limitation, all such
fees, taxes, costs and expenses incident to arbitration, appellate, bankruptcy
and post-judgment proceedings), incurred in that proceeding, in addition to any
other relief to which such party or parties may be entitled. Attorneys’ fees
shall include, without limitation, paralegal fees, investigative fees,
administrative costs, sales and use taxes and all other charges billed by the
attorney to the prevailing party (including any fees and costs associated with
collecting such amounts).
10.15 SEVERABILITY. Any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
[SIGNATURES
APPEAR ON FOLLOWING PAGE]
IN
WITNESS WHEREOF, each of
the Parties has caused this Agreement to be executed on its behalf by its duly
authorized officers as of the day and year first above written.
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CAPITAL CITY BANK GROUP,
INC. |
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By: |
/s/ J. Kimbrough Davis |
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J. Kimbrough Davis |
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Executive Vice President and Chief Financial
Officer |
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FIRST ALACHUA
BANKING CORPORATION |
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By: |
/s/ Jerry M.
Smith |
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Jerry M. Smith, as Chairman, President and Chief
Executive Officer |
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FIRST NATIONAL
BANK OF ALACHUA |
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By: |
/s/ Jerry M.
Smith |
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Jerry M. Smith, as Chairman, President and Chief
Executive Officer |
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LIST
OF EXHIBITS
Exhibit
Number |
Description |
1. |
Bank
Plan of Merger (Section 1.2). |
2. |
Letter
Agreement (Sections 6.6(e), 7.15(e), 7.15(f), and
8.2(k)) |
3. |
Form
of Affiliate Agreement (Sections 7.13 and 8.2(e)). |
4. |
Executive
Employment Agreement (Sections 7.14(b) and 8.2(j)) |
5. |
Form
of Director and Voting Agreement (Sections 7.18 and
8.2(g)). |
6. |
Form
of Non-Competition Agreement (Section 7.22) |
7. |
Matters
as to which Smith, Gambrell & Russell, LLP will opine
(Section 8.2(d)). |
8. |
Form
of Claims Letter (Section 8.2(h)). |
9. |
Matters
as to which Gunster, Yoakley & Stewart, P.A. will opine
(Section 8.3(d)). |
SECTION
IX
BANK
PLAN OF MERGER
PLAN
OF MERGER
AND
MERGER AGREEMENT
Pursuant
to the provisions of Section 658.42 of the Florida Statutes, the undersigned
banks do hereby adopt and enter into this Plan of Merger and Merger Agreement
(this “Agreement”) for the purpose of merging (the “Merger”) First National Bank
of Alachua, a national bank (“First National”), with and into Capital City Bank,
a Florida chartered commercial bank (“CCB”):
(a) |
The
name of each constituent bank and the specific location of its main office
are as follows: |
1. |
Capital City Bank
217
North Monroe Street
Tallahassee,
Florida 32301 |
The
specific location of each of its branch offices is set forth on Schedule 1
attached hereto.
2. |
First National Bank of Alachua1
5000
N.W. 140th Street
Alachua,
Florida 32615 |
The
specific location of each of its branch offices is set forth on Schedule 2
attached hereto.
(b) With
respect to the resulting state bank:
1. |
The name and the specific location of the proposed main
office are:
Capital City Bank
217
North Monroe Street
Tallahassee,
Florida 32301 |
The name
of each of its branch offices will be Capital City Bank. The specific location
of each of its existing and proposed branch offices is set forth on Schedule 3
attached hereto.
2. |
The name and address of each
director who is to serve until the next meeting of the shareholders at
which directors are elected are set forth on Schedule 4 attached
hereto. |
3. |
The name and address of each executive officer are set
forth on Schedule 5 attached hereto. |
4. |
The resulting bank will have a
single class of common stock, par value $100 per share (“Resulting Bank
Common Stock”), consisting of 5,000 authorized shares, of which 1,000 will
be outstanding. The amount of the surplus fund will be $________ and the
amount of retained earnings will be
$________. |
5. |
The resulting bank shall have
trust powers. |
6. |
The complete articles of
incorporation under which the resulting bank will operate are attached
hereto as Schedule 6. |
(c) The terms
for the exchange of shares of the constituent banks are as follows:
1. |
At the Effective Time (as defined
below), each issued and outstanding share of the common stock of First
National, par value $5.00 per share, shall, by virtue of the Merger and
without any action by the holder thereof, be extinguished. At the
Effective Time, each of the 1,000 issued and outstanding shares of the
common stock of CCB, par value $100 per share, shall continue to be
outstanding and held by Capital City Bank Group, Inc., a Florida
corporation, and shall constitute all of the issued and outstanding
Resulting Bank Common Stock. |
2. |
The “Effective Time” shall mean
11:59 pm on the date requested by CCB, as soon as practicable after the
delivery of this Agreement and certified resolutions to the Florida
Department of Financial Services (the
“Department”). |
(d) |
This
Agreement is subject to approval by the Department and by the shareholders
of First National and CCB. |
IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the ___ day
of ________ 2005.
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CAPITAL CITY BANK |
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By: |
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Name:
Title: |
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FIRST NATIONAL
BANK OF ALACHUA |
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By: |
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Name:
Title: |
SECTION
X
DISSENTERS’
RIGHTS
OF APPRAISAL
607.1301
Appraisal rights; definitions. - The
following definitions apply to ss. 607.1302-607.1333:
(1) “Affiliate”
means a person that directly or indirectly through one or more intermediaries
controls, is controlled by, or is under common control with another person or is
a senior executive thereof. For purposes of s. 607.1302(2)(d), a person is
deemed to be an affiliate of its senior executives.
(2) “Beneficial
shareholder” means a person who is the beneficial owner of shares held in a
voting trust or by a nominee on the beneficial owner's behalf.
(3) “Corporation”
means the issuer of the shares held by a shareholder demanding appraisal and,
for matters covered in ss. 607.1322-607.1333, includes the surviving entity in a
merger.
(4) “Fair
value” means the value of the corporation's shares determined:
(a) Immediately
before the effectuation of the corporate action to which the shareholder
objects.
(b) Using
customary and current valuation concepts and techniques generally employed for
similar businesses in the context of the transaction requiring appraisal,
excluding any appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable to the corporation and its
remaining shareholders.
(5) “Interest”
means interest from the effective date of the corporate action until the date of
payment, at the rate of interest on judgments in this state on the effective
date of the corporate action.
(6) “Preferred
shares” means a class or series of shares the holders of which have preference
over any other class or series with respect to distributions.
(7) “Record
shareholder” means the person in whose name shares are registered in the records
of the corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee certificate on file with the corporation.
(8) “Senior
executive” means the chief executive officer, chief operating officer, chief
financial officer, or anyone in charge of a principal business unit or function.
(9) “Shareholder”
means both a record shareholder and a beneficial shareholder.
History. - s.
118, ch. 89-154; s. 21, ch. 2003-283.
607.1302
Right of shareholders to appraisal. -
(1) A
shareholder is entitled to appraisal rights, and to obtain payment of the fair
value of that shareholder's shares, in the event of any of the following
corporate actions:
(a) Consummation
of a merger to which the corporation is a party if shareholder approval is
required for the merger by s. 607.1103 and the shareholder is entitled to vote
on the merger or if the corporation is a subsidiary and the merger is governed
by s. 607.1104;
(b) Consummation
of a share exchange to which the corporation is a party as the corporation whose
shares will be acquired if the shareholder is entitled to vote on the exchange,
except that appraisal rights shall not be available to any shareholder of the
corporation with respect to any class or series of shares of the corporation
that is not exchanged;
(c) Consummation
of a disposition of assets pursuant to s. 607.1202 if the shareholder is
entitled to vote on the disposition, including a sale in dissolution but not
including a sale pursuant to court order or a sale for cash pursuant to a plan
by which all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within 1 year after the date of sale;
(d) Any other
amendment to the articles of incorporation, merger, share exchange, or
disposition of assets to the extent provided by the articles of incorporation,
bylaws, or a resolution of the board of directors, except that no bylaw or board
resolution providing for appraisal rights may be amended or otherwise altered
except by shareholder approval; or
(e) With
regard to a class of shares prescribed in the articles of incorporation prior to
October 1, 2003, including any shares within that class subsequently authorized
by amendment, any amendment of the articles of incorporation if the shareholder
is entitled to vote on the amendment and if such amendment would adversely
affect such shareholder by:
1. Altering
or abolishing any preemptive rights attached to any of his or her shares;
2. Altering
or abolishing the voting rights pertaining to any of his or her shares, except
as such rights may be affected by the voting rights of new shares then being
authorized of any existing or new class or series of shares;
3. Effecting
an exchange, cancellation, or reclassification of any of his or her shares, when
such exchange, cancellation, or reclassification would alter or abolish the
shareholder's voting rights or alter his or her percentage of equity in the
corporation, or effecting a
reduction
or cancellation of accrued dividends or other arrearages in respect to such
shares;
4. Reducing
the stated redemption price of any of the shareholder's redeemable shares,
altering or abolishing any provision relating to any sinking fund for the
redemption or purchase of any of his or her shares, or making any of his or her
shares subject to redemption when they are not otherwise redeemable;
5. Making
noncumulative, in whole or in part, dividends of any of the shareholder's
preferred shares which had theretofore been cumulative;
6. Reducing
the stated dividend preference of any of the shareholder's preferred shares; or
7. Reducing
any stated preferential amount payable on any of the shareholder's preferred
shares upon voluntary or involuntary liquidation.
(2) Notwithstanding
subsection (1), the availability of appraisal rights under paragraphs (1)(a),
(b), (c), and (d) shall be limited in accordance with the following provisions:
(a) Appraisal
rights shall not be available for the holders of shares of any class or series
of shares which is:
1. Listed on
the New York Stock Exchange or the American Stock Exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc.; or
2. Not so
listed or designated, but has at least 2,000 shareholders and the outstanding
shares of such class or series have a market value of at least $10 million,
exclusive of the value of such shares held by its subsidiaries, senior
executives, directors, and beneficial shareholders owning more than 10 percent
of such shares.
(b) The
applicability of paragraph (a) shall be determined as of:
1. The
record date fixed to determine the shareholders entitled to receive notice of,
and to vote at, the meeting of shareholders to act upon the corporate action
requiring appraisal rights; or
2. If there
will be no meeting of shareholders, the close of business on the day on which
the board of directors adopts the resolution recommending such corporate action.
(c) Paragraph
(a) shall not be applicable and appraisal rights shall be available pursuant to
subsection (1) for the holders of any class or series of shares who are required
by the terms of the corporate action requiring appraisal rights to accept for
such shares anything other than cash or shares of any class or
any
series of shares of any corporation, or any other proprietary interest of any
other entity, that satisfies the standards set forth in paragraph (a) at the
time the corporate action becomes effective.
(d) Paragraph
(a) shall not be applicable and appraisal rights shall be available pursuant to
subsection (1) for the holders of any class or series of shares if:
1. Any of
the shares or assets of the corporation are being acquired or converted, whether
by merger, share exchange, or otherwise, pursuant to the corporate action by a
person, or by an affiliate of a person, who:
a. Is, or at
any time in the 1-year period immediately preceding approval by the board of
directors of the corporate action requiring appraisal rights was, the beneficial
owner of 20 percent or more of the voting power of the corporation, excluding
any shares acquired pursuant to an offer for all shares having voting power if
such offer was made within 1 year prior to the corporate action requiring
appraisal rights for consideration of the same kind and of a value equal to or
less than that paid in connection with the corporate action; or
b. Directly
or indirectly has, or at any time in the 1-year period immediately preceding
approval by the board of directors of the corporation of the corporate action
requiring appraisal rights had, the power, contractually or otherwise, to cause
the appointment or election of 25 percent or more of the directors to the board
of directors of the corporation; or
2. Any of
the shares or assets of the corporation are being acquired or converted, whether
by merger, share exchange, or otherwise, pursuant to such corporate action by a
person, or by an affiliate of a person, who is, or at any time in the 1-year
period immediately preceding approval by the board of directors of the corporate
action requiring appraisal rights was, a senior executive or director of the
corporation or a senior executive of any affiliate thereof, and that senior
executive or director will receive, as a result of the corporate action, a
financial benefit not generally available to other shareholders as such, other
than:
a. Employment,
consulting, retirement, or similar benefits established separately and not as
part of or in contemplation of the corporate action;
b. Employment,
consulting, retirement, or similar benefits established in contemplation of, or
as part of, the corporate action that are not more favorable than those existing
before the corporate action or,
if more
favorable, that have been approved on behalf of the corporation in the same
manner as is provided in s. 607.0832; or
c. In the
case of a director of the corporation who will, in the corporate action, become
a director of the acquiring entity in the corporate action or one of its
affiliates, rights and benefits as a director that are provided on the same
basis as those afforded by the acquiring entity generally to other directors of
such entity or such affiliate.
(e) For the
purposes of paragraph (d) only, the term “beneficial owner” means any person
who, directly or indirectly, through any contract, arrangement, or
understanding, other than a revocable proxy, has or shares the power to vote, or
to direct the voting of, shares, provided that a member of a national securities
exchange shall not be deemed to be a beneficial owner of securities held
directly or indirectly by it on behalf of another person solely because such
member is the recordholder of such securities if the member is precluded by the
rules of such exchange from voting without instruction on contested matters or
matters that may affect substantially the rights or privileges of the holders of
the securities to be voted. When two or more persons agree to act together for
the purpose of voting their shares of the corporation, each member of the group
formed thereby shall be deemed to have acquired beneficial ownership, as of the
date of such agreement, of all voting shares of the corporation beneficially
owned by any member of the group.
(3) Notwithstanding
any other provision of this section, the articles of incorporation as originally
filed or any amendment thereto may limit or eliminate appraisal rights for any
class or series of preferred shares, but any such limitation or elimination
contained in an amendment to the articles of incorporation that limits or
eliminates appraisal rights for any of such shares that are outstanding
immediately prior to the effective date of such amendment or that the
corporation is or may be required to issue or sell thereafter pursuant to any
conversion, exchange, or other right existing immediately before the effective
date of such amendment shall not apply to any corporate action that becomes
effective within 1 year of that date if such action would otherwise afford
appraisal rights.
(4) A
shareholder entitled to appraisal rights under this chapter may not challenge a
completed corporate action for which appraisal rights are available unless such
corporate action:
(a) Was not
effectuated in accordance with the applicable provisions of this section or the
corporation's articles of incorporation, bylaws, or board of directors'
resolution authorizing the corporate action; or
(b) Was
procured as a result of fraud or material misrepresentation.
History. - s.
119, ch. 89-154; s. 5, ch. 94-327; s. 31, ch. 97-102; s. 22, ch. 2003-283; s. 1,
ch. 2004-378.
607.1303
Assertion of rights by nominees and beneficial owners. -
(1) A record
shareholder may assert appraisal rights as to fewer than all the shares
registered in the record shareholder's name but owned by a beneficial
shareholder only if the record shareholder objects with respect to all shares of
the class or series owned by the beneficial shareholder and notifies the
corporation in writing of the name and address of each beneficial shareholder on
whose behalf appraisal rights are being asserted. The rights of a record
shareholder who asserts appraisal rights for only part of the shares held of
record in the record shareholder's name under this subsection shall be
determined as if the shares as to which the record shareholder objects and the
record shareholder's other shares were registered in the names of different
record shareholders.
(2) A
beneficial shareholder may assert appraisal rights as to shares of any class or
series held on behalf of the shareholder only if such shareholder:
(a) Submits
to the corporation the record shareholder's written consent to the assertion of
such rights no later than the date referred to in s. 607.1322(2)(b)2.
(b) Does so
with respect to all shares of the class or series that are beneficially owned by
the beneficial shareholder.
History. - s. 23,
ch. 2003-283.
607.1320
Notice of appraisal rights. -
(1) If
proposed corporate action described in s. 607.1302(1) is to be submitted to a
vote at a shareholders' meeting, the meeting notice must state that the
corporation has concluded that shareholders are, are not, or may be entitled to
assert appraisal rights under this chapter. If the corporation concludes that
appraisal rights are or may be available, a copy of ss. 607.1301-607.1333 must
accompany the meeting notice sent to those record shareholders entitled to
exercise appraisal rights.
(2) In a
merger pursuant to s. 607.1104, the parent corporation must notify in writing
all record shareholders of the subsidiary who are entitled to assert appraisal
rights that the corporate action became effective. Such notice must be sent
within 10 days after the corporate action became effective and include the
materials described in s. 607.1322.
(3) If the
proposed corporate action described in s. 607.1302(1) is to be approved other
than by a shareholders' meeting, the notice referred to in subsection (1) must
be sent to all shareholders at the time that consents are first solicited
pursuant to s. 607.0704, whether or not consents are solicited from all
shareholders, and include the materials described in s. 607.1322.
History. - s.
120, ch. 89-154; s. 35, ch. 93-281; s. 32, ch. 97-102; s. 24, ch. 2003-283.
607.1321
Notice of intent to demand payment. -
(1) If
proposed corporate action requiring appraisal rights under s. 607.1302 is
submitted to a vote at a shareholders' meeting, or is submitted to a shareholder
pursuant to a consent vote under s. 607.0704, a shareholder who wishes to assert
appraisal rights with respect to any class or series of shares:
(a) Must
deliver to the corporation before the vote is taken, or within 20 days after
receiving the notice pursuant to s. 607.1320(3) if action is to be taken without
a shareholder meeting, written notice of the shareholder's intent to demand
payment if the proposed action is effectuated.
(b) Must not
vote, or cause or permit to be voted, any shares of such class or series in
favor of the proposed action.
(2) A
shareholder who does not satisfy the requirements of subsection
(1) is
not entitled to payment under this chapter.
History. - s. 25,
ch. 2003-283; s. 7, ch. 2004-378.
607.1322
Appraisal notice and form. -
(1) If
proposed corporate action requiring appraisal rights under s. 607.1302(1)
becomes effective, the corporation must deliver a written appraisal notice and
form required by paragraph (2)(a) to all shareholders who satisfied the
requirements of s. 607.1321. In the case of a merger under s. 607.1104, the
parent must deliver a written appraisal notice and form to all record
shareholders who may be entitled to assert appraisal rights.
(2) The
appraisal notice must be sent no earlier than the date the corporate action
became effective and no later than 10 days after such date and must:
(a) Supply a
form that specifies the date that the corporate action became effective and that
provides for the shareholder to state:
1. The
shareholder's name and address.
2. The
number, classes, and series of shares as to which the shareholder asserts
appraisal rights.
3. That the
shareholder did not vote for the transaction.
4. Whether
the shareholder accepts the corporation's offer as stated in subparagraph (b)4.
5. If the
offer is not accepted, the shareholder's estimated fair value of the shares and
a demand for payment of the shareholder's estimated value plus interest.
(b) State:
1. Where the
form must be sent and where certificates for certificated shares must be
deposited and the date by which those certificates must be deposited, which date
may not be earlier than the date for receiving the required form under
subparagraph 2.
2. A date by
which the corporation must receive the form, which date may not be fewer than 40
nor more than 60 days after the date the subsection (1) appraisal notice and
form are sent, and state that the shareholder shall have waived the right to
demand appraisal with respect to the shares unless the form is received by the
corporation by such specified date.
3. The
corporation's estimate of the fair value of the shares.
4. An offer
to each shareholder who is entitled to appraisal rights to pay the corporation's
estimate of fair value set forth in subparagraph 3.
5. That, if
requested in writing, the corporation will provide to the shareholder so
requesting, within 10 days after the date specified in subparagraph 2., the
number of shareholders who return the forms by the specified date and the total
number of shares owned by them.
6. The date
by which the notice to withdraw under s. 607.1323 must be received, which date
must be within 20 days after the date specified in subparagraph 2.
(c) Be
accompanied by:
1. Financial
statements of the corporation that issued the shares to be appraised, consisting
of a balance sheet as of the end of the fiscal year ending not more than 15
months prior to the date of the corporation's appraisal notice, an income
statement for that year, a cash flow statement for that year, and the latest
available interim financial statements, if any.
2. A copy of
ss. 607.1301-607.1333.
History. - s. 26,
ch. 2003-283.
607.1323
Perfection of rights; right to withdraw. -
(1) A
shareholder who wishes to exercise appraisal rights must execute and return the
form received pursuant to s. 607.1322(1) and, in the case of certificated
shares, deposit the shareholder's certificates in accordance with the terms of
the notice by the date referred to in the notice pursuant to s. 607.1322(2)(b)2.
Once a shareholder deposits that shareholder's certificates or, in the case of
uncertificated shares, returns the executed forms, that shareholder loses all
rights
as a
shareholder, unless the shareholder withdraws pursuant to subsection (2).
(2) A
shareholder who has complied with subsection (1) may nevertheless decline to
exercise appraisal rights and withdraw from the appraisal process by so
notifying the corporation in writing by the date set forth in the appraisal
notice pursuant to s. 607.1322(2)(b)6. A shareholder who fails to so withdraw
from the appraisal process may not thereafter withdraw without the corporation's
written consent.
(3) A
shareholder who does not execute and return the form and, in the case of
certificated shares, deposit that shareholder's share certificates if required,
each by the date set forth in the notice described in subsection (2), shall not
be entitled to payment under this chapter.
History. - s. 27,
ch. 2003-283.
607.1324
Shareholder's acceptance of corporation's offer. -
(1) If the
shareholder states on the form provided in s. 607.1322(1) that the shareholder
accepts the offer of the corporation to pay the corporation's estimated fair
value for the shares, the corporation shall make such payment to the shareholder
within 90 days after the corporation's receipt of the form from the shareholder.
(2) Upon
payment of the agreed value, the shareholder shall cease to have any interest in
the shares.
History. - s. 28,
ch. 2003-283.
607.1326
Procedure if shareholder is dissatisfied with offer. -
(1) A
shareholder who is dissatisfied with the corporation's offer as set forth
pursuant to s. 607.1322(2)(b)4. must notify the corporation on the form provided
pursuant to s. 607.1322(1) of that shareholder's estimate of the fair value of
the shares and demand payment of that estimate plus interest.
(2) A
shareholder who fails to notify the corporation in writing of that shareholder's
demand to be paid the shareholder's stated estimate of the fair value plus
interest under subsection (1) within the timeframe set forth in s.
607.1322(2)(b)2. waives the right to demand payment under this section and shall
be entitled only to the payment offered by the corporation pursuant to s.
607.1322(2)(b)4.
History. - s. 29,
ch. 2003-283.
607.1330
Court action. -
(1) If a
shareholder makes demand for payment under s. 607.1326 which remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60-day period,
any
shareholder who has made a demand pursuant to s. 607.1326 may commence the
proceeding in the name of the corporation.
(2) The
proceeding shall be commenced in the appropriate court of the county in which
the corporation's principal office, or, if none, its registered office, in this
state is located. If the corporation is a foreign corporation without a
registered office in this state, the proceeding shall be commenced in the county
in this state in which the principal office or registered office of the domestic
corporation merged with the foreign corporation was located at the time of the
transaction.
(3) All
shareholders, whether or not residents of this state, whose demands remain
unsettled shall be made parties to the proceeding as in an action against their
shares. The corporation shall serve a copy of the initial pleading in such
proceeding upon each shareholder party who is a resident of this state in the
manner provided by law for the service of a summons and complaint and upon each
nonresident shareholder party by registered or certified mail or by publication
as provided by law.
(4) The
jurisdiction of the court in which the proceeding is commenced under subsection
(2) is plenary and exclusive. If it so elects, the court may appoint one or more
persons as appraisers to receive evidence and recommend a decision on the
question of fair value. The appraisers shall have the powers described in the
order appointing them or in any amendment to the order. The shareholders
demanding appraisal rights are entitled to the same discovery rights as parties
in other civil proceedings. There shall be no right to a jury trial.
(5) Each
shareholder made a party to the proceeding is entitled to judgment for the
amount of the fair value of such shareholder's shares, plus interest, as found
by the court.
(6) The
corporation shall pay each such shareholder the amount found to be due within 10
days after final determination of the proceedings. Upon payment of the judgment,
the shareholder shall cease to have any interest in the shares.
History. - s. 2,
ch. 2004-378.
607.1331
Court costs and counsel fees. -
(1) The court
in an appraisal proceeding shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against the corporation, except that
the court may assess costs against all or some of the shareholders demanding
appraisal, in amounts the court finds equitable, to the extent the court finds
such shareholders acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
(2) The court
in an appraisal proceeding may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against
the corporation and in favor of any or all shareholders demanding appraisal if
the court finds the corporation did not substantially comply with ss. 607.1320
and 607.1322; or
(b) Against
either the corporation or a shareholder demanding appraisal, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
(3) If the
court in an appraisal proceeding finds that the services of counsel for any
shareholder were of substantial benefit to other shareholders similarly
situated, and that the fees for those services should not be assessed against
the corporation, the court may award to such counsel reasonable fees to be paid
out of the amounts awarded the shareholders who were benefited.
(4) To the
extent the corporation fails to make a required payment pursuant to s. 607.1324,
the shareholder may sue directly for the amount owed and, to the extent
successful, shall be entitled to recover from the corporation all costs and
expenses of the suit, including counsel fees.
History. - s. 30,
ch. 2003-283; s. 98, ch. 2004-5.
607.1332
Disposition of acquired shares. - Shares
acquired by a corporation pursuant to payment of the agreed value thereof or
pursuant to payment of the judgment entered therefor, as provided in this
chapter, may be held and disposed of by such corporation as authorized but
unissued shares of the corporation, except that, in the case of a merger or
share exchange, they may be held and disposed of as the plan of merger or share
exchange otherwise provides. The shares of the surviving corporation into which
the shares of such shareholders demanding appraisal rights would have been
converted had they assented to the merger shall have the status of authorized
but unissued shares of the surviving corporation.
History. - s. 31,
ch. 2003-283.
607.1333
Limitation on corporate payment. -
(1) No
payment shall be made to a shareholder seeking appraisal rights if, at the time
of payment, the corporation is unable to meet the distribution standards of s.
607.06401. In such event, the shareholder shall, at the shareholder's option:
(a) Withdraw
his or her notice of intent to assert appraisal rights, which shall in such
event be deemed withdrawn with the consent of the corporation; or
(b) Retain
his or her status as a claimant against the corporation and, if it is
liquidated, be subordinated to the rights of creditors of the corporation, but
have rights superior to the shareholders not asserting appraisal rights, and if
it is not liquidated, retain his or her right to be paid for the
shares,
which right the corporation shall be obliged to satisfy when the restrictions of
this section do not apply.
(2) The
shareholder shall exercise the option under paragraph (1)(a) or paragraph (b) by
written notice filed with the corporation within 30 days after the corporation
has given written notice that the payment for shares cannot be made because of
the restrictions of this section. If the shareholder fails to exercise the
option, the shareholder shall be deemed to have withdrawn his or her notice of
intent to assert appraisal rights.
History.
- s. 32,
ch. 2003-283.
SECTION
XI
FAIRNESS
OPINION OF SUNTRUST ROBINSON HUMPHREY
February
3, 2005
Board of
Directors
First
Alachua Banking Corporation
15000
N.W. 140th
Street
Alachua,
Florida 32615
Ladies
and Gentlemen:
We
understand that First Alachua Banking Corporation, a Florida corporation (the
“Company”) is considering a transaction whereby the Company will be
merged (the
“Proposed Transaction”) with and into Capital City Bank Group, Inc., a Florida
corporation (“Capital City”). Pursuant
to the terms and conditions of the Agreement and Plan of Merger (the “Merger
Agreement”), to be dated as of the date hereof, by and between the Company and
Capital City, among other things, each issued and outstanding share (other than
certain shares specified in the Merger Agreement) of (i) Class A Common Stock,
par value $0.10 per share (the “Class A Common Stock”), of the Company and (ii)
Class B Common Stock, par value $0.10 per share (the “Class B Common Stock” and,
together with the Class A Common Stock, the “Company Common Stock”), of the
Company, will be converted into the following:
(i) |
a
multiple of a share of Capital City common stock, $0.01 per share (“CCBG
Common Stock”), equal to the quotient obtained by dividing (x) one half of
the Adjusted Purchase Price Per Share (as defined below) by (y) $40.00;
and |
(ii) |
cash
equal to one half of the Adjusted Purchase Price Per
Share. |
As
defined in the Merger Agreement, the term “Adjusted Purchase Price Per Share”
means the quotient obtained by dividing (i) the Adjusted Purchase Price by (ii)
the number of shares of Company Common Stock outstanding immediately prior to
the effective time of the Proposed Transaction (other than certain shares
specified in the Merger Agreement). The term “Adjusted Purchase Price” means
$58,000,000 reduced by any adjustments as provided in the Merger Agreement. For
purposes of our opinion, we have assumed that the number of shares of Class A
Common Stock outstanding immediately prior to the effective time of the Proposed
Transaction will be 4,456, the number of shares of Class B Common Stock
outstanding immediately prior to the effective time of the Proposed Transaction
will be 5,730 and that the Adjusted Purchase Price will equal $58,000,000 at the
effective time of the Proposed Transaction. Therefore, each share of Company
Common Stock will be exchanged for 71.176 shares of CCBG Common Stock and
$2,847.04 in cash (collectively, the “Merger Consideration”). Based on the last
trading price of CCBG Common Stock on February 3, 2005, the value of the shares
of CCBG Common Stock to be received in exchange for each share of Company Common
Stock was $2,843.48; therefore the total consideration per share for purposes of
our opinion is $5,690.53 and the total aggregate consideration is
$57,963,750.
Board of
Directors
First
Alachua Banking Corporation
February
3, 2005
We
have been requested by the Company to render our opinion to the Board of
Directors of the Company with respect to the fairness, from a financial point of
view, of the Merger Consideration to the holders of Company Common Stock in the
Proposed Transaction. Our opinion addresses the aggregate consideration to be
received by the holders of Company Common Stock as a whole, without regard to
size of holdings by individual shareholders, and we are not opining on the
particular situations of specific shareholders.
In
arriving at our opinion, we: (1) reviewed the Merger Agreement; (2) reviewed
certain publicly available business and historical financial information and
other data relating to the business and financial prospects of the Company and
Capital City, including certain publicly available consensus financial forecasts
and estimates of Capital City that were reviewed and discussed with the
management of Capital City; (3) reviewed internal financial and operating
information with respect to the business, operations and prospects of the
Company furnished to us by the Company that is not publicly available; (4)
reviewed the reported prices and trading activity of the CCBG Common Stock and
compared those prices and activity with other publicly traded companies which we
deemed relevant; (5) compared the historical financial results and present
financial condition of the Company and Capital City and, for Capital City only,
compared stock market data, with those of publicly traded companies which we
deemed relevant; (6) reviewed certain pro forma effects of the Proposed
Transaction on Capital City’s financial statements and potential benefits of the
Proposed Transaction and discussed these items with the management of the
Company and Capital City; and (7) compared the financial terms of the Proposed
Transaction with the publicly available financial terms of certain other
transactions which we deemed relevant. In addition, we have had discussions with
the management of the Company and Capital City concerning their respective
businesses, operations, assets, present condition and future prospects and
undertook such other studies, analyses and investigations, and considered such
information, as we deemed appropriate.
In
connection with our review, with your consent, we have assumed and relied upon,
without independent verification, the accuracy and completeness of all of the
financial and other information discussed with or reviewed by us in arriving at
our opinion, and we have not assumed any responsibility or liability therefor.
With respect to the financial forecasts, estimates, pro forma effects and
estimates of synergies and other potential benefits of the Proposed Transaction
provided to or discussed with us, we have assumed, at the direction of the
management of the Company and without independent verification or investigation,
that they have been reasonably prepared on bases reflecting the best currently
available information, estimates and judgments of the management of the Company
and Capital City and are otherwise reasonable. We have also assumed with your
approval that the future financial results referred to herein that were provided
to us by the Company and Capital City will be achieved, and the synergies and
other potential benefits of the Proposed Transaction will be realized, at the
times and in the amounts estimated by the management of the Company and Capital
City. In arriving at our opinion, we have not conducted a physical inspection of
the properties and facilities of the Company. We did not review individual
credit files nor did we make any independent evaluation or appraisal of any of
the assets or liabilities (including any contingent, derivative or
off-balance-sheet assets or liabilities) of the Company or Capital City or any
of
Board of
Directors
First
Alachua Banking Corporation
February
3, 2005
their
respective subsidiaries, and we were not furnished with any such evaluation or
appraisal. In addition, we are not an expert in the evaluation of loan and lease
portfolios for purposes of assessing the adequacy of the allowances for losses
with respect to such portfolios and, accordingly, we have assumed that the
Company’s and Capital City’s allowances for losses are in the aggregate adequate
to cover those losses.
We have
assumed that the Proposed Transaction will be treated as a tax-free
reorganization for federal income tax purposes. We have also assumed that all
material governmental, regulatory or other consents and approvals necessary for
the consummation of the Proposed Transaction will be obtained without any
adverse effect on the Company or Capital City or on the expected benefits of the
Proposed Transaction.
Our
opinion is necessarily based upon market, economic and other conditions as they
exist on, and can be evaluated as of, the date of this letter. Our opinion does
not address the relative merits of the Proposed Transaction as compared to other
business strategies or transactions that might be available to the Company or
the Company’s underlying business decision to effect the Proposed Transaction.
We have not been asked to, nor do we, offer any opinion as to any terms or
conditions of the Merger Agreement or the form of the Proposed Transaction
(other than, as described below, the Merger Consideration). We express no
opinion as to what the value of CCBG Common Stock will be when issued pursuant
to the Merger Agreement or the prices at which it will trade or otherwise be
transferable at any time. In rendering this opinion, we have assumed, with your
consent, that the Merger Agreement does not differ in any respect from the draft
we have examined and that Capital City and the Company will comply in all
material respects with the terms of the Merger Agreement and that the Proposed
Transaction will be consummated in accordance with its terms without waiver,
modification or amendment of any material term, condition or agreement. It
should be understood that, although subsequent developments or circumstances may
affect this opinion, we do not have any obligation to update or revise the
opinion.
We
have acted as financial advisor to the Company in connection with the Proposed
Transaction and will receive a fee for our services, a portion of which is
contingent upon the consummation of the Proposed Transaction, and we will
receive a fee upon delivery of this opinion. In addition, the Company has agreed
to indemnify us for certain liabilities arising out of the rendering of this
opinion. In the ordinary course of our business, we and our affiliates actively
trade in the debt and equity securities of Capital City for our own account and
for the accounts of our customers and, accordingly, may at any time hold a long
or short position in such securities. In addition, we and our affiliates
(including SunTrust Banks, Inc.) may have other financing and business
relationships with the Company and Capital City in the ordinary course of
business.
Based
upon and subject to the foregoing, and such other factors as we deemed relevant,
we are of the opinion as of the date hereof, that the Merger Consideration is
fair, from a financial point of view to the holders of Company Common Stock.
Board of
Directors
First
Alachua Banking Corporation
February
3, 2005
This
opinion is being rendered at the behest of the Board of Directors and is for the
benefit of the Board in its evaluation of the Proposed Transaction, and does not
constitute a recommendation as to how any stockholder should act or vote with
respect to any matters relating to the Proposed Transaction. This opinion may
not be disclosed, referred to, or communicated (in whole or in part) to any
third party for any purpose whatsoever except with our prior written approval.
This opinion may be reproduced in full in any proxy statement/prospectus mailed
to shareholders of the Company but may not otherwise be disclosed publicly in
any manner without our prior written approval.
SUNTRUST CAPITAL MARKETS,
INC.
SECTION
XII
CAPITAL
CITY BANK GROUP FINANCIAL STATEMENTS
(including
the audited December 31, 2003 financial statements
and the
unaudited September 30, 2004 financial statements)
Independent
Auditors’ Report
The Board
of Directors
Capital
City Bank Group, Inc.:
We have
audited the accompanying consolidated statements of financial condition of
Capital City Bank Group, Inc. and subsidiary as of December 31, 2003 and 2002
and the related consolidated statements of income, changes in shareowners’
equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. The consolidated statements of income, changes
in shareowners’ equity and cash flows of Capital City Bank Group, Inc. and
subsidiary for the year ended December 31, 2001 were audited by other auditors
who have ceased operations. Those auditors expressed an unqualified opinion on
those consolidated financial statements, before the revision described in Note 6
to the consolidated financial statements, in their report dated January 24,
2002.
We
conducted our audits in accordance with auditing standards generally accepted in
the United States of America. 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 2003 and 2002 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Capital City
Bank Group, Inc. and subsidiary as of December 31, 2003 and 2002, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
As
discussed in Note 1 to the consolidated financial statements, the Company
changed its method of recording stock-based compensation in 2003, and as
discussed in Note 6 to the consolidated financial statements, changed its method
of accounting for goodwill and other intangible assets in 2002.
As
discussed above, the consolidated statements of income, changes in shareowners’
equity and cash flows of Capital City Bank Group, Inc. and subsidiary for the
year ended December 31, 2001 were audited by other auditors who have ceased
operations. As described in Note 6, these consolidated financial statements have
been revised to include the transitional disclosures required by Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
which was adopted by the Company as of January 1, 2002. In our opinion, the
disclosures for 2001 in Note 6 are
appropriate.
However, we were not engaged to audit, review, or apply any procedures to the
2001 consolidated financial statements of Capital City Bank Group, Inc. and
subsidiary other than with respect to such disclosures and, accordingly, we do
not express
an
opinion or any other form of assurance on the 2001 consolidated financial
statements taken as a whole.
KPMG
LLP
March 8,
2004
REPORT
OF INDEPENDENT PUBLIC ACCOUNTANTS
To
Capital City Bank Group, Inc.:
We have
audited the accompanying consolidated statements of financial condition of
CAPITAL CITY BANK GROUP, INC. (a Florida corporation) AND SUBSIDIARIES as of
December 31, 2001 and 2000, and the related consolidated statements of income,
changes in shareowners' equity, and cash flows for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with auditing standards generally accepted in
the 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 financial position of Capital City Bank Group, Inc. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.
ARTHUR
ANDERSEN LLP
Atlanta,
Georgia
January
24, 2002
This
report is a copy of a previously issued report and the predecessor auditor has
not reissued the report.
CONSOLIDATED
STATEMENTS OF INCOME
(Dollars
in Thousands, Except Per Share Data)(1)
|
|
|
For the Years Ended December 31, |
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
INTEREST
INCOME |
|
|
|
|
|
|
|
|
|
|
Interest
and Fees on Loans |
|
$ |
92,092 |
|
$ |
94,921 |
|
$ |
102,473 |
|
Investment
Securities: |
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury |
|
|
664 |
|
|
2 |
|
|
367 |
|
U.S.
Government Agencies/Corporations |
|
|
2,486 |
|
|
5,366 |
|
|
6,933 |
|
States
and Political Subdivisions |
|
|
2,409 |
|
|
2,752 |
|
|
3,281 |
|
Other
Securities |
|
|
575 |
|
|
1,573 |
|
|
2,319 |
|
Funds
Sold |
|
|
1,261 |
|
|
1,481 |
|
|
3,610 |
|
Total
Interest Income |
|
|
99,487 |
|
|
106,095 |
|
|
118,983 |
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
11,567 |
|
|
20,551 |
|
|
45,214 |
|
Short-Term
Borrowings |
|
|
1,270 |
|
|
767 |
|
|
2,164 |
|
Long-Term
Debt |
|
|
2,002 |
|
|
1,185 |
|
|
871 |
|
Total
Interest Expense |
|
|
14,839 |
|
|
22,503 |
|
|
48,249 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Interest Income |
|
|
84,648 |
|
|
83,592 |
|
|
70,734 |
|
Provision
for Loan Losses |
|
|
3,436 |
|
|
3,297 |
|
|
3,983 |
|
Net
Interest Income After Provision for |
|
|
|
|
|
|
|
|
|
|
Loan
Losses |
|
|
81,212 |
|
|
80,295 |
|
|
66,751 |
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST
INCOME |
|
|
|
|
|
|
|
|
|
|
Service
Charges on Deposit Accounts |
|
|
16,319 |
|
|
12,749 |
|
|
10,647 |
|
Data
Processing |
|
|
2,403 |
|
|
2,006 |
|
|
2,079 |
|
Asset
Management Fees |
|
|
2,650 |
|
|
2,521 |
|
|
2,556 |
|
Securities
Transactions |
|
|
1 |
|
|
10 |
|
|
4 |
|
Mortgage
Banking Revenues |
|
|
6,090 |
|
|
5,502 |
|
|
3,138 |
|
Other |
|
|
14,476 |
|
|
13,315 |
|
|
12,735 |
|
Total
Noninterest Income |
|
|
41,939 |
|
|
36,103 |
|
|
31,159 |
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST
EXPENSE |
|
|
|
|
|
|
|
|
|
|
Salaries
and Associate Benefits |
|
|
45,118 |
|
|
42,142 |
|
|
36,808 |
|
Occupancy,
Net |
|
|
5,972 |
|
|
5,719 |
|
|
5,497 |
|
Furniture
and Equipment |
|
|
7,840 |
|
|
7,677 |
|
|
7,173 |
|
Other |
|
|
25,448 |
|
|
25,087 |
|
|
22,448 |
|
Total
Noninterest Expense |
|
|
84,378 |
|
|
80,625 |
|
|
71,926 |
|
|
|
|
|
|
|
|
|
|
|
|
Income
Before Income Taxes |
|
|
38,773 |
|
|
35,773 |
|
|
25,984 |
|
Income
Taxes |
|
|
13,580 |
|
|
12,691 |
|
|
9,118 |
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME |
|
$ |
25,193 |
|
$ |
23,082 |
|
$ |
16,866 |
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
NET INCOME PER SHARE |
|
$ |
1.91 |
|
$ |
1.75 |
|
$ |
1.27 |
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
NET INCOME PER SHARE |
|
$ |
1.90 |
|
$ |
1.74 |
|
$ |
1.27 |
|
|
|
|
|
|
|
|
|
|
|
|
Average
Basic Common Shares Outstanding |
|
|
13,222 |
|
|
13,225 |
|
|
13,242 |
|
|
|
|
|
|
|
|
|
|
|
|
Average
Diluted Common Shares Outstanding |
|
|
13,251 |
|
|
13,274 |
|
|
13,292 |
|
(1) |
All
share and per share data have been adjusted to reflect the 5-for-4 stock
split effective June 13, 2003. |
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
(Dollars
in Thousands, Except Per Share Data)(1)
|
|
As
of December 31, |
|
|
|
2003 |
|
2002 |
|
ASSETS |
|
|
|
|
|
|
|
Cash
and Due From Banks |
|
$ |
93,140 |
|
$ |
89,823 |
|
Funds
Sold |
|
|
125,452 |
|
|
170,936 |
|
Total
Cash and Cash Equivalents |
|
|
218,592 |
|
|
260,759 |
|
|
|
|
|
|
|
|
|
Investment
Securities, Available-for-Sale |
|
|
181,734 |
|
|
180,315 |
|
Loans,
Net of Unearned Interest |
|
|
1,341,632 |
|
|
1,285,221 |
|
Allowance
for Loan Losses |
|
|
(12,429 |
) |
|
(12,495 |
) |
Loans,
Net |
|
|
1,329,203 |
|
|
1,272,726 |
|
|
|
|
|
|
|
|
|
Premises
and Equipment, Net |
|
|
54,011 |
|
|
48,897 |
|
Intangibles |
|
|
25,792 |
|
|
29,034 |
|
Other
Assets |
|
|
37,170 |
|
|
33,040 |
|
Total
Assets |
|
$ |
1,846,502 |
|
$ |
1,824,771 |
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
Noninterest
Bearing Deposits |
|
$ |
455,550 |
|
$ |
406,081 |
|
Interest
Bearing Deposits |
|
|
1,018,655 |
|
|
1,028,119 |
|
Total
Deposits |
|
|
1,474,205 |
|
|
1,434,200 |
|
|
|
|
|
|
|
|
|
Short-Term
Borrowings |
|
|
108,184 |
|
|
113,675 |
|
Long-Term
Debt |
|
|
46,475 |
|
|
71,745 |
|
Other
Liabilities |
|
|
14,829 |
|
|
18,620 |
|
Total
Liabilities |
|
|
1,643,693 |
|
|
1,638,240 |
|
|
|
|
|
|
|
|
|
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;
13,236,462 and 13,196,211 shares |
|
|
|
|
|
|
|
issued
and outstanding at December 31, 2003 |
|
|
|
|
|
|
|
and
December 31, 2002, respectively |
|
|
132 |
|
|
132 |
|
Additional
Paid-In Capital |
|
|
16,157 |
|
|
14,691 |
|
Retained
Earnings |
|
|
185,134 |
|
|
168,587 |
|
Accumulated
Other Comprehensive Income, Net of Tax |
|
|
1,386 |
|
|
3,121 |
|
Total
Shareowners' Equity |
|
|
202,809 |
|
|
186,531 |
|
Commitments
and Contingencies (See Note 18) |
|
|
|
|
|
|
|
Total
Liabilities and Shareowners' Equity |
|
$ |
1,846,502 |
|
$ |
1,824,771 |
|
(1) |
All share and per share data have
been adjusted to reflect the 5-for-4 stock split effective June 13,
2003. |
The
accompanying Notes to Consolidated Financial Statements are an
integral part
of these statements.
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
(Dollars
in Thousands, Except Per Share Data)(1)
|
|
|
Common
Stock |
|
|
Additional
Paid-In
Capital |
|
|
Retained
Earnings |
|
|
Accumulated
Other
Comprehensive
Income
(Loss),
Net
of Taxes |
|
|
Total |
|
Balance,
December 31, 2000 |
|
$ |
126 |
|
$ |
7,343 |
|
$ |
141,659 |
|
$ |
(1,522 |
) |
$ |
147,607 |
|
Comprehensive
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income |
|
|
— |
|
|
— |
|
|
16,866 |
|
|
|
|
|
|
|
Net
Change in Unrealized Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On
Available-for-Sale Securities |
|
|
— |
|
|
— |
|
|
— |
|
|
3,872 |
|
|
|
|
Total
Comprehensive Income |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
20,738 |
|
Cash
Dividends ($.476 per share) |
|
|
— |
|
|
— |
|
|
(6,376 |
) |
|
— |
|
|
(6,376 |
) |
Issuance
of Common Stock |
|
|
8 |
|
|
14,749 |
|
|
— |
|
|
— |
|
|
14,757 |
|
Repurchase
and Retirement of Common Stock |
|
|
(2 |
) |
|
(4,940 |
) |
|
— |
|
|
— |
|
|
(4,942 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2001 |
|
|
132 |
|
|
17,152 |
|
|
152,149 |
|
|
2,350 |
|
|
171,783 |
|
Comprehensive
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income |
|
|
— |
|
|
— |
|
|
23,082 |
|
|
|
|
|
|
|
Net
Change in Unrealized Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On
Available-for-Sale Securities |
|
|
— |
|
|
— |
|
|
— |
|
|
771 |
|
|
|
|
Total
Comprehensive Income |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
23,853 |
|
Cash
Dividends ($.502 per share) |
|
|
— |
|
|
— |
|
|
(6,644 |
) |
|
— |
|
|
(6,644 |
) |
Issuance
of Common Stock |
|
|
— |
|
|
934 |
|
|
— |
|
|
— |
|
|
934 |
|
Repurchase
and Retirement of Common Stock |
|
|
— |
|
|
(3,395 |
) |
|
— |
|
|
— |
|
|
(3,395 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2002 |
|
|
132 |
|
|
14,691 |
|
|
168,587 |
|
|
3,121 |
|
|
186,531 |
|
Comprehensive
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income |
|
|
— |
|
|
— |
|
|
25,193 |
|
|
|
|
|
|
|
Net
Change in Unrealized (Loss) Gain |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On
Available-for-Sale Securities |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,735 |
) |
|
|
|
Total
Comprehensive Income |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
23,458 |
|
Cash
Dividends ($.656 per share) |
|
|
— |
|
|
— |
|
|
(8,646 |
) |
|
— |
|
|
(8,646 |
) |
Executive
Stock Performance Plan Compensation |
|
|
— |
|
|
62 |
|
|
— |
|
|
— |
|
|
62 |
|
Issuance
of Common Stock |
|
|
— |
|
|
1,421 |
|
|
— |
|
|
— |
|
|
1,421 |
|
Repurchase
and Retirement of Common Stock |
|
|
— |
|
|
(17 |
) |
|
— |
|
|
— |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2003 |
|
$ |
132 |
|
$ |
16,157 |
|
$ |
185,134 |
|
$ |
1,386 |
|
$ |
202,809 |
|
(1) |
All share and per share data have
been adjusted to reflect the 5-for-4 stock split effective June 13,
2003. |
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
For the Years Ended December 31,
|
|
(Dollars
in Thousands) |
|
2003 |
|
2002 |
|
2001 |
|
CASH
FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Net
Income |
|
$ |
25,193 |
|
$ |
23,082 |
|
$ |
16,866 |
|
Adjustments
to Reconcile Net Income to |
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Operating Activities: |
|
|
|
|
|
|
|
|
|
|
Provision
for Loan Losses |
|
|
3,436 |
|
|
3,297 |
|
|
3,983 |
|
Depreciation |
|
|
4,857 |
|
|
4,897 |
|
|
4,373 |
|
Loss
on Disposal of Fixed Assets |
|
|
91 |
|
|
32 |
|
|
108 |
|
Net
Securities Amortization |
|
|
2,180 |
|
|
889 |
|
|
1,173 |
|
Amortization
of Intangible Assets |
|
|
3,242 |
|
|
3,242 |
|
|
3,772 |
|
Gain
on Sale of Investment Securities |
|
|
(1 |
) |
|
(10 |
) |
|
(4 |
) |
Non-Cash
Compensation |
|
|
508 |
|
|
892 |
|
|
489 |
|
Deferred
Income Taxes |
|
|
755 |
|
|
(1,479 |
) |
|
7 |
|
Net
Decrease in Other Assets |
|
|
1,385 |
|
|
4,183 |
|
|
1,744 |
|
Net
(Decrease) Increase in Other Liabilities |
|
|
(3,791 |
) |
|
(953 |
) |
|
967 |
|
Net
Cash Provided by Operating Activities |
|
|
37,855 |
|
|
38,062 |
|
|
33,478 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Proceeds
from Payments/Maturities/Sales of |
|
|
|
|
|
|
|
|
|
|
Investment
Securities Available-for-Sale |
|
|
101,359 |
|
|
82,466 |
|
|
117,198 |
|
Purchase
of Investment Securities Available-for-Sale |
|
|
(107,695 |
) |
|
(43,370 |
) |
|
(6,053 |
) |
Net
Increase in Loans |
|
|
(65,180 |
) |
|
(46,006 |
) |
|
(103,042 |
) |
Net
Cash Received From Acquisitions |
|
|
— |
|
|
— |
|
|
81,390 |
|
Purchase
of Premises & Equipment |
|
|
(11,152 |
) |
|
(6,868 |
) |
|
(7,671 |
) |
Proceeds
From Sales of Premises & Equipment |
|
|
1,090 |
|
|
89 |
|
|
418 |
|
Net
Cash (Used in) Provided by Investing Activities |
|
|
(81,578 |
) |
|
(13,689 |
) |
|
82,240 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) in Deposits |
|
|
40,005 |
|
|
(115,901 |
) |
|
77,844 |
|
Net
(Decrease) Increase in Short-Term Borrowings |
|
|
(45,913 |
) |
|
46,633 |
|
|
(41,431 |
) |
Borrowing
from Long-Term Debt |
|
|
16,564 |
|
|
62,058 |
|
|
7,861 |
|
Repayment
of Long-Term Debt |
|
|
(1,412 |
) |
|
(3,883 |
) |
|
(6,269 |
) |
Dividends
Paid |
|
|
(8,646 |
) |
|
(6,644 |
) |
|
(6,376 |
) |
Repurchase
of Common Stock |
|
|
(17 |
) |
|
(3,395 |
) |
|
(4,942 |
) |
Issuance
of Common Stock |
|
|
975 |
|
|
688 |
|
|
435 |
|
Net
Cash Provided By (Used in) Financing Activities |
|
|
1,556 |
|
|
(20,444 |
) |
|
27,122 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Decrease) Increase in Cash and Cash Equivalents |
|
|
(42,167 |
) |
|
3,929 |
|
|
142,840 |
|
Cash
and Cash Equivalents at Beginning of Year |
|
|
260,759 |
|
|
256,830 |
|
|
113,990 |
|
Cash
and Cash Equivalents at End of Year |
|
$ |
218,592 |
|
$ |
260,759 |
|
$ |
256,830 |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Paid on Deposits |
|
$ |
11,999 |
|
$ |
23,694 |
|
$ |
44,990 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Paid on Debt |
|
$ |
3,238 |
|
$ |
1,825 |
|
$ |
2,883 |
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
Paid |
|
$ |
16,303 |
|
$ |
13,175 |
|
$ |
9,290 |
|
|
|
|
|
|
|
|
|
|
|
|
Loans
Transferred to Other Real Estate |
|
$ |
5,267 |
|
$ |
1,238 |
|
$ |
2,149 |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock as Non-cash Compensation |
|
$ |
508 |
|
$ |
246 |
|
$ |
785 |
|
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
Notes
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" or collectively the "Company"), and its wholly-owned
subsidiary, Capital City Bank ("CCB" or the "Bank"). All material inter-company
transactions and accounts have been eliminated.
The
Company, which operates in a single reportable business segment 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.
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.
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.
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 Income upon realization or when impairment of values is deemed to be other
than temporary. 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 Income and reported net of
taxes in the accumulated other comprehensive income (loss) component of
shareowners' equity until realized. Accretion and amortization are recognized on
the effective yield method over the life of the securities.
Loans
Loans are
stated at the principal amount outstanding, net of unearned income. Interest
income is generally 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. Loans
held for sale are valued at lower of cost or market value based on information
obtained from third party investors.
Allowance
for Loan Losses
The
allowance for loan losses is that amount considered adequate to absorb losses
inherent in the portfolio based on management’s evaluation of the current risk
characteristics of the loan portfolio as of the reporting date. The allowance is
a significant estimate recorded by management and is based on the credit quality
of the portfolio.
The
evaluation of credit quality begins with the review for impairment of commercial
purpose loans with balances exceeding $25,000. Impaired loans are defined as
those in which the full collection of principal and interest in accordance with
the contractual terms is improbable. Impaired loans typically include those that
are in nonaccrual status or classified as doubtful as defined by the Company’s
internal risk rating system. Generally, loans are placed on nonaccrual status
when interest becomes past due 90 days or more, or management deems the ultimate
collection of principal and interest is in doubt. A specific allowance for loss
is made for impaired loans based on a comparison of the recorded investment in
the loan to either the present value of the loan’s expected cash flow, the
loan’s estimated market price or the estimated fair value of the underlying
collateral less costs to sell the collateral.
Commercial
purpose loans exceeding $100,000 that are not impaired, but have weaknesses
requiring closer management attention, are analyzed to determine if an allowance
is required. This analysis is based primarily on the underlying value of the
collateral. If the value of the collateral is considered insufficient, an
allowance is made for the deficiency. The value of the collateral is dependent
on current economic conditions in the communities we serve and is subject to
change. In addition, the analysis includes changes in risk ratings that are
assigned based on the Bank’s Asset Classification Policy, and for the ultimate
disposition of the loan. The ultimate disposition may include upgrades in risk
ratings, payoff of the loan, or charge-off of the loan. This migration analysis
results in a charge-off ratio by loan pool of classified loans that is applied
to the balance of the pool to determine general reserves for specifically
identified problem loans. This charge-off ratio is adjusted for various
environmental factors including past due and nonperforming trends in the loan
portfolio, the micro-and macro-economic outlook, and credit administration
practices as determined by independent parties.
Larger
commercial purpose loans that show no signs of weakness are assigned an
allowance based on the historical loss ratios in pools of loans with similar
characteristics. The historical loss ratios are determined by analyzing losses
over the prior twelve quarters, with more emphasis being placed on the recent
four quarters. The historical loss ratios are then adjusted for certain external
factors, including micro- and macro-economic outlook, past due and nonperforming
trends within the portfolio, loan growth, and credit administration practices.
Large
groups of smaller balance homogeneous loans are collectively evaluated to
determine the allowance required for loan losses. These small balance homogenous
loans include commercial purpose loans less than $100,000, consumer installment
loans, credit card loans and residential mortgage loans. Historical loss ratios
are determined for these smaller balance loan pools and applied to the balance
of the related pool of loans to determine the allowance needed. The historical
loss ratios are adjusted for external factors as described above.
Long-Lived
Assets
Premises
and equipment are 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. Major additions are capitalized and
depreciated in the same manner. Repairs and maintenance are charged to
noninterest expense as incurred.
Intangible
assets, other than goodwill, consist of core deposit 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 10 years.
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.
Goodwill
As of
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangibles" ("SFAS 142"). The adoption of
SFAS 142 required the Company to discontinue goodwill amortization and identify
reporting units to which the goodwill related for purposes of assessing
potential impairment of goodwill on an annual basis, or more frequently, if
events or changes in circumstances indicate that the carrying value of the asset
may not be recoverable. In
accordance with the guidelines in SFAS 142, the Company determined it has one
reporting unit with goodwill. As of December 31, 2003, the Company performed its
annual impairment review and concluded that no impairment adjustment was
necessary.
Income
Taxes
The
Company files consolidated federal and state income tax returns. In general, the
parent company and its subsidiary compute their tax provisions as separate
entities prior to recognition of any tax expense or benefits which may accrue
from filing a consolidated return.
The
Company follows the asset and liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the carrying amounts
of existing assets and liabilities on the Company’s consolidated statement of
financial position and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Stock
Based Compensation
As of
December 31, 2003, the Company had three stock-based compensation plans,
consisting of the Associate Stock Incentive Plan ("AIP"), the Associate Stock
Purchase Plan ("ASPP") and the Director Stock Purchase Plan ("DSPP"). In
addition to stock-based compensation plans, the Company also executed an
associate incentive stock option arrangement effective January 1, 2003. Prior to
2003, the Company
accounted
for its stock-based compensation under the recognition and measurement
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees ("APB 25"), and
related interpretations. Stock-based employee compensation cost is reflected in
2001 and 2002 net income for only the AIP, as the ASPP and DSPP were considered
non-compensatory under the provisions of APB 25. As a result of SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure," the
Company adopted the fair value recognition provisions of SFAS No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation," prospectively to all associate
awards granted, modified, or settled on or after January 1, 2003. Awards under
the Company’s plans vest over periods ranging from six months to four years.
Therefore, the cost related to stock-based associate compensation included in
the determination of net income for 2003 is different than that which would have
been recognized if the fair value based method had been applied to all awards
since the original effective date of SFAS 123, as a result of the difference
between compensation measurement dates under SFAS 123 and APB 25, the
differences in what instruments are considered non-compensatory, and the fact
that awards granted prior to January 1, 2003 remain accounted for under APB
25.
The
following table illustrates the effect on net income and earnings per share if
the fair value based method had been applied to all outstanding and unvested
awards in each period.
(Dollars
in Thousands, Except Per Share Data) |
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
Net
income, as reported |
|
$ |
25,193 |
|
$ |
23,082 |
|
$ |
16,866 |
|
|
|
|
|
|
|
|
|
|
|
|
Add:
Stock based compensation included |
|
|
|
|
|
|
|
|
|
|
in
reported net income, net of tax |
|
|
634 |
|
|
553 |
|
|
302 |
|
|
|
|
|
|
|
|
|
|
|
|
Deduct:
Stock based compensation |
|
|
|
|
|
|
|
|
|
|
determined
under fair value based method |
|
|
|
|
|
|
|
|
|
|
for
all awards, net of tax |
|
|
(348 |
) |
|
(388 |
) |
|
(344 |
) |
|
|
|
|
|
|
|
|
|
|
|
Pro
forma net income |
|
$ |
25,479 |
|
$ |
23,247 |
|
$ |
16,824 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share: |
|
|
|
|
|
|
|
|
|
|
Basic-as
reported |
|
$ |
1.91 |
|
$ |
1.75 |
|
$ |
1.27 |
|
Basic-pro
forma |
|
$ |
1.93 |
|
$ |
1.76 |
|
$ |
1.27 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted-as
reported |
|
$ |
1.90 |
|
$ |
1.74 |
|
$ |
1.27 |
|
Diluted-pro
forma |
|
$ |
1.92 |
|
$ |
1.75 |
|
$ |
1.26 |
|
Director
Stock Purchase Plan ("DSPP")
The
Company's DSPP allows the directors to purchase common stock at a price equal to
90% of the closing price on the date of purchase. The DSPP has 187,500 shares
reserved for issuance. In 2003, 2002 and 2001, CCBG issued 4,861, 4,438, and
4,344 shares, respectively, under this plan. A total of 47,019 shares have been
issued to directors since the inception of this plan. Prior to 2003, the DSPP
plan was accounted for under the provisions of APB 25 and no compensation
expense was recognized. In accordance with the Company’s adoption of SFAS 123,
compensation expense has been recognized for the Company's purchase plan
activity in 2003.
Associate
Stock Purchase Plan ("ASPP")
Under the
Company's ASPP, substantially all associates may purchase common stock through
payroll deductions at a price equal to 90% of the lower of the fair market value
at the beginning or end of each six-month offering period. Stock purchases under
the ASPP are limited to 10% of an associate's eligible compensation, up to a
maximum
of $25,000 (fair market value on each enrollment date) in any plan year. The
ASPP has 562,500 shares of common stock reserved for issuance. CCBG issued
25,234, 31,588, and 18,755 shares under the plan in 2003, 2002, and 2001,
respectively. A total of 301,693 shares have been issued since inception of this
plan. Prior to 2003, the ASPP was accounted for under the provisions of APB 25
and no compensation expense was recognized. In accordance with the Company’s
adoption of SFAS 123, compensation expense has been recognized for the Company's
purchase plan activity in 2003.
Transactions
under the ASPP were as follows:
|
|
|
Number of Shares |
|
|
Purchase Price
per Share(1) |
|
Available
at December 31, 2000 |
|
|
336,384 |
|
|
|
|
Purchased |
|
|
(18,755 |
) |
$ |
17.63 |
|
|
|
|
|
|
|
|
|
Available
at December 31, 2001 |
|
|
317,629 |
|
|
|
|
Purchased |
|
|
(31,588 |
) |
$ |
18.90 |
|
|
|
|
|
|
|
|
|
Available
at December 31, 2002 |
|
|
286,041 |
|
|
|
|
Purchased |
|
|
(25,234 |
) |
$ |
30.46 |
|
|
|
|
|
|
|
|
|
Available
at December 31, 2003 |
|
|
260,807 |
|
|
|
|
(1) |
Weighted Average Price for two annual
offering periods |
Based on
the Black-Scholes option pricing model, the weighted average estimated fair
value of the purchase rights granted under the ASPP was $6.65 for 2003, $3.96
for 2002, and $3.50 for 2001. In calculating pro forma compensation at December
31, the fair value of each stock purchase right is estimated on the date of
grant using the following weighted average assumptions:
|
|
2003 |
|
2002 |
|
2001 |
|
Dividend
yield |
|
|
1.8 |
% |
|
2.4 |
% |
|
2.4 |
% |
Expected
volatility |
|
|
34.5 |
% |
|
33.0 |
% |
|
26.0 |
% |
Risk-free
interest rate |
|
|
1.1 |
% |
|
1.7 |
% |
|
4.6 |
% |
Expected
life (in years) |
|
|
0.5 |
|
|
0.5 |
|
|
0.5 |
|
Associate
Stock Incentive Plan ("AIP")
Under the
Company's AIP shares are granted to participants based upon the achievement of
performance goals established by the Board of Directors at the beginning of each
award period. A total of 937,500 shares of common stock have been reserved for
issuance under this Plan. Award periods are either one year for the short-term
plan, or three years for the long-term plan. The short-term plan was accounted
for under SFAS 123 for 2003 and compensation expense was measured under the fair
value method as of the grant date and recognized over the service period. The
long-term plan was accounted for as a variable plan under APB 25 for stock
grants prior to 2003, and compensation expense was measured under the intrinsic
value method as of the measurement date and recognized over the related service
period. CCBG issued 10,596, 12,618, and 35,861 shares under the plan in 2003,
2002, and 2001, respectively. A total of 242,057 shares have been issued since
inception of this plan.
Executive
Stock Option Agreement
On
January 23, 2003, the Company's Board of Directors approved a stock option
agreement for a key executive officer (William G. Smith, Jr. - Chairman,
President
and CEO,
CCBG) under the provisions of the 1996 Associate Stock Incentive Plan. This
agreement grants a non-qualified stock option award upon achieving certain
earnings per share conditions set by the Board, subject to certain vesting
requirements. The options granted under the agreement have a term of ten years
and vest at a rate of one-third on each of the first, second, and third
anniversaries of the date of grant. As of
December 31, 2003, no option shares had been issued or exercised. Effective
January 29, 2004, the earnings per share conditions were analyzed resulting in
economic value earned by the executive of approximately $269,000, for which the
Company will issue option shares equal to that value. During 2003, the Company
recognized $61,658 of expense related to this agreement in accordance with the
provisions of SFAS 123.
Accounting
Pronouncements
In
December 2003, the FASB issued Interpretation No. 46 ("FIN46") (revised December
2003 ("FIN46R")), "Consolidation of Variable Interest Entities," which addresses
how a business enterprise should evaluate whether it has a controlling financial
interest in an entity through means other than voting rights and accordingly
should consolidate the entity. FIN46R replaces FIN46, which was issued in
January 2003. FIN46R applies immediately to a variable interest entity created
after January 31, 2003 and as of the first interim period ending after March 15,
2004 to those variable interest entities created before February 1, 2003 and not
already consolidated under FIN46 in previously issued financial statements. The
Company does not hold any interest in variable interest entities that would
require accounting treatment prescribed by this pronouncement.
In May
2003, the FASB issued SFAS No. 150 ("SFAS 150"), "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
150 modifies the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity. The new statement
requires that those instruments be classified as liabilities in statements of
financial position. SFAS 150 is effective for all financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003. The Company does not
currently maintain any financial instruments that would require the accounting
treatment prescribed by this pronouncement.
In
November 2002, the FASB issued Interpretation No. 45 ("FIN45"), "Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (the "Interpretation"), which
addresses the disclosure to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees. The Interpretation
also requires the recognition of a liability by a guarantor at the inception of
certain guarantees.
FIN45
requires the guarantor to recognize a liability for the non-contingent component
of the guarantee; this is the obligation to stand ready to perform in the event
that specified triggering events or conditions occur. The initial measurement of
this liability is the fair value of the guarantee at inception. The recognition
of the liability is required even it is not probable that payments will be
required under the guarantee or if the guarantee was issued with a premium
payment or as part of a transaction with multiple elements. The Company has
adopted the disclosure requirements of FIN45 and will apply the recognition and
measurement provisions for all guarantees entered into or modified after
December 31, 2002. To date, the Company has not entered into or modified any
guarantees pursuant to the provisions of FIN45.
In
October 2002, the FASB issued SFAS No. 147, "Accounting for Certain Acquisitions
of Banking or Thrift Institutions" ("SFAS 147"). SFAS 147 removes financial
institutions (with the exception of combinations of mutual enterprises) from the
scope of both SFAS No. 72 ("SFAS 72"), "Accounting for Certain Acquisitions of
Banking or Thrift Institutions" and FASB Interpretation No. 9, applying APB
Opinions No. 16 and 17, "When a Savings and Loan Association or a Similar
Institution is Acquired in a Business Combination Accounted for by the Purchase
Method" and requires that those transactions be accounted for in accordance with
SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." As a result, the requirement under SFAS 72 to recognize (and
subsequently amortize) any excess of the fair value of liabilities assumed over
the fair value of tangible and identifiable intangible assets acquired as an
unidentifiable intangible asset no longer applies to acquisitions within the
scope of SFAS 147. In addition, SFAS 147 amends SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," to include in its scope
long-term customer-relationship intangible assets of financial institutions such
as depositor- and borrower-relationship intangible assets and credit cardholder
intangible assets. The adoption of SFAS 147 has not had a material impact on the
reported results of operations of the Company.
Note
2
ACQUISITIONS
Subsequent
to December 31, 2003, the Company entered into an agreement to acquire Quincy
State Bank, an affiliate bank of Synovus Financial Corp ("Synovus"). Quincy
State Bank is a $127 million (as of December 31, 2003) state chartered financial
institution with offices located in Quincy and Havana, Florida. The Company will
pay approximately $26.1 million in cash to Synovus in consideration for Synovus
merging Quincy State Bank into CCB. The transaction will be accounted for as a
purchase and result in approximately $15 million of intangibles (goodwill and
core deposit). An appraisal will be conducted to determine the amount and life
of the core deposit intangible.
On March
9, 2001, the Company completed a purchase and assumption transaction with
Wachovia Bank, NA, formerly First Union National Bank ("Wachovia") and acquired
six of Wachovia's offices in Georgia which included real estate, loans and
deposits. The transaction resulted in approximately $11.3 million in intangible
assets, primarily core deposit intangibles, which are being amortized over a
10-year period. The Company purchased approximately $18 million in loans and
assumed deposits of approximately $105 million.
On March
2, 2001, the Company completed its acquisition of First Bankshares of West
Point, Inc., and its subsidiary, First National Bank of West Point. At the time
of the acquisition, First National Bank of West Point had approximately $144
million in assets with one office in West Point, Georgia, and two offices in the
Greater Valley area of Alabama. First Bankshares of West Point, Inc., merged
with the Company, and First National Bank of West Point merged with Capital City
Bank. The Company issued 3.6419 shares and $17.7543 in cash for each of the
192,481 outstanding shares of First Bankshares of West Point, Inc., resulting in
the issuance of 701,000 shares of Company common stock and the payment of $3.4
million in cash for a total purchase price of approximately $17.0 million. The
transaction was accounted for as a purchase and resulted in approximately $2.5
million of intangible assets, primarily goodwill.
Note
3
INVESTMENT
SECURITIES
The
amortized cost and related market value of investment securities
available-for-sale at December 31, were as follows:
|
|
2003 |
|
(Dollars in Thousands) |
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Market
Value
|
|
U.S.
Treasury |
|
$ |
78,498 |
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Corporations |
|
|
26,862 |
|
|
133 |
|
|
— |
|
|
26,995 |
|
States
and Political |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subdivisions |
|
|
55,641 |
|
|
1,511 |
|
|
— |
|
|
57,152 |
|
Mortgage-Backed
Securities |
|
|
11,618 |
|
|
427 |
|
|
— |
|
|
12,045 |
|
Other
Securities |
|
|
6,927 |
|
|
13 |
|
|
— |
|
|
6,940 |
|
Total
Investment Securities |
|
$ |
179,546 |
|
|
|
|
|
|
|
|
|
|
|
|
2002 |
|
(Dollars in Thousands) |
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Market
Value
|
|
U.S.
Treasury |
|
$ |
10,438 |
|
|
|
|
|
|
|
|
|
|
U.S.
Government Agencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Corporations |
|
|
51,075 |
|
|
884 |
|
|
— |
|
|
51,959 |
|
States
and Political |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subdivisions |
|
|
62,845 |
|
|
2,632 |
|
|
2 |
|
|
65,475 |
|
Mortgage-Backed
Securities |
|
|
34,750 |
|
|
1,180 |
|
|
— |
|
|
35,930 |
|
Other
Securities |
|
|
16,281 |
|
|
227 |
|
|
— |
|
|
16,508 |
|
Total
Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
|
$ |
175,389 |
|
|
|
|
|
|
|
|
|
|
The total
proceeds from the sale of investment securities and the gross realized gains and
losses from the sale 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 |
|
2003 |
$ |
48,922 |
|
$ |
24 |
|
$ |
23 |
|
2002 |
$ |
44,576 |
|
$ |
10 |
|
$ |
— |
|
2001 |
$ |
84,794 |
|
$ |
4 |
|
$ |
— |
|
Total
proceeds do not include principal reductions in mortgage-backed securities and
proceeds from securities which were called of $52.4 million, $37.9 million, and
$33.0 million in 2003, 2002 and 2001, respectively.
As of
December 31, 2003, the Company's investment securities had the following
maturity distribution based on contractual maturities:
(Dollars in
Thousands) |
|
|
Amortized Cost |
|
|
Market Value |
|
Due
in one year or less |
|
$ |
103,031 |
|
$ |
103,331 |
|
Due
after one through five years |
|
|
69,919 |
|
|
71,771 |
|
Due
after five through ten years |
|
|
674 |
|
|
710 |
|
Over
ten years |
|
|
5,922 |
|
|
5,922 |
|
Total
Investment Securities |
|
$ |
179,546 |
|
$ |
181,734 |
|
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.
Securities
with an amortized cost of $73.9 million and $115.4 million at December 31, 2003
and 2002, respectively, were pledged to secure public deposits and for other
purposes.
Securities
with unrealized losses at year-end 2003 not recognized in income by period of
time unrealized losses have existed are as follows:
|
|
|
Less Than 12
months |
|
|
Greater Than 12 Months |
|
|
Total |
|
(Dollars in Thousands) |
|
|
Fair
Value |
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
Unrealized Loss |
|
U.S.
Treasury |
|
$ |
15,025 |
|
$ |
1 |
|
$ |
— |
|
$ |
— |
|
$ |
15,025 |
|
$ |
1 |
|
Total
Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
|
$ |
15,025 |
|
$ |
1 |
|
$ |
— |
|
$ |
— |
|
$ |
15,025 |
|
$ |
1 |
|
Note
4
LOANS
At
December 31, the composition of the Company's loan portfolio was as
follows:
(Dollars
in Thousands) |
|
|
2003 |
|
|
2002 |
|
Commercial,
Financial and Agricultural |
|
$ |
160,048 |
|
$ |
141,459 |
|
Real
Estate - Construction |
|
|
89,149 |
|
|
91,110 |
|
Real
Estate - Commercial Mortgage |
|
|
391,250 |
|
|
356,807 |
|
Real
Estate - Residential |
|
|
346,170 |
|
|
359,338 |
|
Real
Estate - Home Equity |
|
|
116,810 |
|
|
92,277 |
|
Real
Estate - Loans Held-for-Sale |
|
|
4,810 |
|
|
22,454 |
|
Consumer |
|
|
233,395 |
|
|
221,776 |
|
Total
Loans, Net of |
|
|
|
|
|
|
|
Unearned
Interest |
|
$ |
1,341,632 |
|
$ |
1,285,221 |
|
Nonaccruing
loans amounted to $2.3 million and $2.5 million, at December 31, 2003 and 2002,
respectively. There were no restructured loans at December 31, 2003 or 2002.
Interest on nonaccrual loans is generally recognized only when received. Cash
collected on nonaccrual loans is applied against the principal balance or
recognized as interest income based upon management's expectations as to the
ultimate collectibility of principal and interest in full. If interest on
nonaccruing loans had been recognized on a fully accruing basis, interest income
recorded would have been $166,000, $116,000, and $122,000 higher for the years
ended December 31, 2003, 2002, and 2001, respectively.
Note
5
ALLOWANCE
FOR LOAN LOSSES
An
analysis of the changes in the allowance for loan losses for the years ended
December 31, is as follows:
(Dollars
in Thousands) |
|
2003 |
|
2002 |
|
2001
|
|
Balance,
Beginning of Year |
|
$ |
12,495 |
|
$
|
|
|
$
|
|
|
Acquired
Reserves |
|
|
— |
|
|
— |
|
|
1,206 |
|
Provision
for Loan Losses |
|
|
3,436 |
|
|
3,297 |
|
|
3,983 |
|
Recoveries
on Loans |
|
|
|
|
|
|
|
|
|
|
Previously
Charged-Off |
|
|
1,037 |
|
|
1,374 |
|
|
993 |
|
Loans
Charged-Off |
|
|
(4,539 |
) |
|
(4,272 |
) |
|
(4,650 |
) |
Balance,
End of Year |
|
$ |
12,429 |
|
$ |
|
|
$
|
|
|
Selected
information pertaining to impaired loans, at December 31, is as
follows:
|
|
|
2003 |
|
|
2002 |
|
(Dollars in Thousands) |
|
|
Balance |
|
|
Valuation
Allowance |
|
|
Balance |
|
|
Valuation
Allowance |
|
With
Related Credit Allowance |
|
$ |
810 |
|
$ |
178 |
|
$ |
412 |
|
$ |
219 |
|
Without
Related Credit Allowance |
|
|
477 |
|
|
— |
|
|
722 |
|
|
— |
|
Average
Recorded Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
for
the Period |
|
|
6,737 |
|
|
* |
|
|
2,544 |
|
|
* |
|
The
Company recognizes income on impaired loans primarily on the cash basis. Any
change in the present value of expected cash flows is recognized through the
allowance for loan losses. For the years ended December 31, 2003, 2002, and
2001, the Company recognized $194,000, $169,000 and $36,000, in interest income
on impaired loans, all of which was collected in cash.
Note
6
INTANGIBLE
ASSETS
The
Company had intangible assets of $25.8 million and $29.0 million at December 31,
2003 and December 31, 2002, respectively. Intangible assets at December 31, were
as follows:
|
|
|
2003 |
|
|
2002 |
|
(Dollars in Thousands) |
|
|
Gross Amount |
|
|
Accumulated
Amortization |
|
|
Gross Amount |
|
|
Accumulated
Amortization |
|
Core
Deposits Intangibles |
|
$ |
33,752 |
|
$ |
14,640 |
|
|
|
|
|
|
|
Goodwill |
|
|
10,466 |
|
|
3,786 |
|
|
10,466 |
|
|
3,786 |
|
Total
Intangible Assets |
|
|
44,218 |
|
$ |
18,426 |
|
$ |
|
|
|
|
|
Net
Core Deposit Intangibles
As of
December 31, 2003 and December 31, 2002, the Company had net core deposit
intangibles of $19.1 million and $22.4 million, respectively. Amortization
expense for the twelve months of 2003, 2002 and 2001 was $3.2 million, $3.2
million and $3.8 million, respectively. The estimated annual amortization
expense for the next five years is expected to be approximately $3.2 million per
year.
Goodwill
As of
December 31, 2003 and December 31, 2002, the Company had goodwill, net of
accumulated amortization, of $6.7 million. Goodwill is the Company's only
intangible asset that is no longer subject to amortization under the provisions
of SFAS 142. On December 31, 2003, the Company performed its annual impairment
review and concluded that no impairment adjustment was necessary.
Transitional
Disclosures:
The pro
forma effects, net of tax, of the adoption of SFAS No. 142 for the year ended
December 31, were as follows:
(Dollars in Thousands, Except Per Share
Data) |
|
2001 |
|
Reported
Net Income |
|
$ |
16,866 |
|
Goodwill
Amortization |
|
|
707 |
|
Adjusted
Net Income |
|
$ |
17,573 |
|
|
|
|
|
|
Basic
Earnings Per Share: |
|
|
|
|
Reported
Net Income |
|
$ |
1.27 |
|
Goodwill
Amortization |
|
|
.05 |
|
Adjusted
Net Income |
|
$ |
1.32 |
|
|
|
|
|
|
Diluted
Earnings Per Share: |
|
|
|
|
Reported
Net Income |
|
$ |
1.27 |
|
Goodwill
Amortization |
|
|
.05 |
|
Adjusted
Net Income |
|
$ |
1.32 |
|
No
goodwill amortization was recorded in 2003 and 2002 due to the discontinuance of
amortization under the provisions of SFAS 142.
Note
7
PREMISES
AND EQUIPMENT
The
composition of the Company's premises and equipment at December 31, was as
follows:
(Dollars in Thousands) |
|
|
2003 |
|
|
2002 |
|
Land |
|
$ |
12,152 |
|
$ |
11,239 |
|
Buildings |
|
|
51,577 |
|
|
46,131 |
|
Fixtures
and Equipment |
|
|
43,623 |
|
|
44,242 |
|
Total |
|
|
107,352 |
|
|
101,612 |
|
Accumulated
Depreciation |
|
|
(53,341 |
) |
|
(52,715 |
) |
Premises
and Equipment, Net |
|
$ |
54,011 |
|
$ |
48,897 |
|
Note
8
DEPOSITS
Interest
bearing deposits, by category, as of December 31, were as follows:
(Dollars in Thousands) |
|
|
2003 |
|
|
2002 |
|
NOW
Accounts |
|
$ |
276,934 |
|
$ |
276,487 |
|
Money
Market Accounts |
|
|
207,934 |
|
|
209,508 |
|
Savings
Accounts |
|
|
110,834 |
|
|
104,053 |
|
Time
Deposits |
|
|
422,953 |
|
|
438,071 |
|
Total |
|
$ |
1,018,655 |
|
$ |
1,028,119 |
|
Time
deposits in denominations of $100,000 or more totaled $107.2 million and $92.0
million at December 31, 2003 and 2002, respectively.
At
December 31, 2003, the scheduled maturities of time deposits were as
follows:
(Dollars
in Thousands) |
|
|
|
|
2004 |
|
$ |
325,091 |
|
2005 |
|
|
64,891 |
|
2006 |
|
|
22,589 |
|
2007 |
|
|
8,466 |
|
2008
and thereafter |
|
|
1,916 |
|
Total |
|
$ |
422,953 |
|
The
balances maintained on deposit with the Federal Reserve Bank as of December 31,
2003 and 2002, were $57.1 million and $56.9 million, respectively.
Interest
expense on deposits for the three years ended December 31, was as
follows:
(Dollars in Thousands) |
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
NOW
Accounts |
|
$ |
678 |
|
$ |
1,272 |
|
$ |
4,046 |
|
Money
Market Accounts |
|
|
1,310 |
|
|
2,904 |
|
|
6,237 |
|
Savings
Accounts |
|
|
189 |
|
|
500 |
|
|
1,865 |
|
Time
Deposits < $100,000 |
|
|
7,007 |
|
|
12,060 |
|
|
26,046 |
|
Time
Deposits > $100,000 |
|
|
2,383 |
|
|
3,815 |
|
|
7,020 |
|
Total |
|
$ |
11,567 |
|
$ |
20,551 |
|
$ |
45,214 |
|
Note
9
SHORT-TERM
BORROWINGS
Short-term borrowings included the
following:
(Dollars
in Thousands) |
|
|
Federal
Funds
Repurchase |
|
|
Securities
Sold Under
Repurchase
Agreements |
|
|
Other
Short-Term
Borrowings |
|
2003 |
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, |
|
$ |
12,624 |
|
$ |
53,223 |
|
$ |
42,337 |
|
Maximum
indebtedness at any month end |
|
|
23,930 |
|
|
90,209 |
|
|
44,226 |
|
Daily
average indebtedness outstanding |
|
|
14,768 |
|
|
49,785 |
|
|
36,721 |
|
Average
rate paid for the year |
|
|
0.94 |
% |
|
0.59 |
% |
|
2.28 |
% |
Average
rate paid on period-end borrowings |
|
|
0.68 |
% |
|
0.31 |
% |
|
2.50 |
% |
2002 |
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, |
|
$ |
14,120 |
|
$ |
77,318 |
|
$ |
22,237 |
|
Maximum
indebtedness at any month end |
|
|
17,395 |
|
|
77,318 |
|
|
22,237 |
|
Daily
average indebtedness outstanding |
|
|
9,079 |
|
|
55,679 |
|
|
7,836 |
|
Average
rate paid for the year |
|
|
1.46 |
% |
|
0.87 |
% |
|
1.89 |
% |
Average
rate paid on period-end borrowings |
|
|
0.55 |
% |
|
0.83 |
% |
|
2.32 |
% |
Note
10
LONG-TERM
DEBT
Long-term
debt included the following at December 31:
(Dollars
in Thousands) |
|
2003 |
|
2002 |
|
Federal
Home Loan Bank Notes, |
|
|
|
|
|
Due
on March 8, 2004, fixed rate of 6.64% |
|
$ |
— |
|
$ |
113 |
|
Due
on March 10, 2004, fixed rate of 2.22% |
|
|
— |
|
|
20,000 |
|
Due
on September 10, 2004, fixed rate of 2.48% |
|
|
— |
|
|
20,000 |
|
Due
on December 16, 2004, fixed rate of 6.52% |
|
|
— |
|
|
116 |
|
Due
on December 16, 2004, fixed rate of 6.52% |
|
|
— |
|
|
69 |
|
Due
on September 12, 2005, fixed rate of 3.06% |
|
|
15,000 |
|
|
15,000 |
|
Due
on December 19, 2005, fixed rate of 6.04% |
|
|
1,103 |
|
|
1,222 |
|
Due
on February 15, 2006, fixed rate of 3.00% |
|
|
86 |
|
|
120 |
|
Due
on April 24, 2007, fixed rate of 7.30% |
|
|
— |
|
|
249 |
|
Due
on May 30, 2008, fixed rate of 2.50% |
|
|
168 |
|
|
— |
|
Due
on June 13, 2008, fixed rate of 5.40% |
|
|
643 |
|
|
786 |
|
Due
on November 10, 2008, fixed rate of 4.12% |
|
|
2,419 |
|
|
— |
|
Due
on October 19, 2009, fixed rate of 3.69% |
|
|
906 |
|
|
993 |
|
Due
on November 10, 2010, fixed rate of 4.72% |
|
|
798 |
|
|
— |
|
Due
on December 31, 2010, fixed rate of 3.85% |
|
|
1,115 |
|
|
— |
|
Due
on December 18, 2012, fixed rate of 4.84% |
|
|
631 |
|
|
650 |
|
Due
on March 18, 2013, fixed rate of 6.37% |
|
|
755 |
|
|
807 |
|
Due
on June 17, 2013, fixed rate of 3.85% |
|
|
98 |
|
|
— |
|
Due
on June 17, 2013, fixed rate of 3.53% |
|
|
1,060 |
|
|
— |
|
Due
on June 17, 2013, fixed rate of 4.11% |
|
|
1,877 |
|
|
— |
|
Due
on September 23, 2013, fixed rate of 5.64% |
|
|
1,076 |
|
|
1,148 |
|
Due
on January 27, 2014, fixed rate of 5.79% |
|
|
1,344 |
|
|
1,387 |
|
Due
on May 27, 2014, fixed rate of 5.92% |
|
|
569 |
|
|
609 |
|
Due
on July 20, 2016, fixed rate of 6.27% |
|
|
1,489 |
|
|
1,607 |
|
Due
on October 31, 2017, fixed rate of 4.79% |
|
|
1,160 |
|
|
1,236 |
|
Due
on December 11, 2017, fixed rate of 4.78% |
|
|
1,021 |
|
|
1,093 |
|
Due
on December 20, 2017, fixed rate of 5.37% |
|
|
1,003 |
|
|
1,025 |
|
Due
on February 26, 2018, fixed rate of 4.36% |
|
|
2,418 |
|
|
— |
|
Due
on September 18, 2018, fixed rate of 5.15% |
|
|
708 |
|
|
— |
|
Due
on November 5, 2018, fixed rate of 5.10% |
|
|
3,866 |
|
|
— |
|
Due
on December 3, 2018, fixed rate of 4.87% |
|
|
737 |
|
|
— |
|
Due
on December 17, 2018, fixed rate of 6.33% |
|
|
1,710 |
|
|
1,776 |
|
Due
on December 24, 2018, fixed rate of 6.29% |
|
|
769 |
|
|
794 |
|
Due
on February 16, 2021, fixed rate of 3.00% |
|
|
915 |
|
|
945 |
|
Due
on May 30, 2023, fixed rate of 2.50% |
|
|
1,031 |
|
|
— |
|
Total
outstanding |
|
$ |
46,475 |
|
$ |
71,745 |
|
The
contractual maturities of long-term debt for the five years succeeding December
31, 2003, are as follows:
(Dollars in Thousands) |
|
|
|
2004 |
|
$ |
1,878 |
|
2005 |
|
|
17,859 |
|
2006 |
|
|
1,931 |
|
2007 |
|
|
1,983 |
|
2008
and thereafter |
|
|
22,824 |
|
Total |
|
$ |
46,475 |
|
The
Federal Home Loan Bank advances are collateralized with 1-4 family residential
mortgage loans. Interest on the Federal Home Loan Bank advances is paid on a
monthly basis.
The
Company has the ability to draw on a Revolving Credit Note, due on May 16, 2004.
Upon expiration of this note, the outstanding balance may be converted to a term
loan and repaid over a period of seven years. The Company, at its option, may
select from various loan rates including the following: Prime, LIBOR, or the
lender’s cost of funds rate, plus or minus increments thereof. The LIBOR or cost
of funds rates may be fixed for a period up to six months. The revolving credit
is unsecured, but upon conversion is to be collateralized by common stock of the
subsidiary bank equal in value to 125% of the principal balance of the loan. The
existing loan agreement places certain restrictions on the amount of capital
which must be maintained by the Company. At December 31, 2003, the Company was
in compliance with all of the terms of the agreement and had $25 million
available under a $25 million line of credit facility.
Note
11
INCOME
TAXES
The
provision for income taxes reflected in the statement of income is comprised of
the following components:
(Dollars
in Thousands) |
|
|
2003 |
|
|
2002 |
|
|
2001
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
10,876 |
|
$ |
12,123 |
|
$ |
7,709 |
|
State |
|
|
1,949 |
|
|
2,047 |
|
|
1,402 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
682 |
|
|
(1,337 |
) |
|
6 |
|
State |
|
|
73 |
|
|
(142 |
) |
|
1 |
|
Total |
|
$ |
13,580 |
|
$ |
12,691 |
|
$ |
9,118 |
|
The net
deferred tax assets and the temporary differences comprising that balance at
December 31, 2003 and 2002, are as follows:
(Dollars
in Thousands) |
|
2003 |
|
2002
|
|
Deferred
Tax Assets attributable to: |
|
|
|
|
|
|
|
Allowance
for Loan Losses |
|
$ |
4,216 |
|
$ |
4,028 |
|
Accrued
Pension/SERP |
|
|
985 |
|
|
1,144 |
|
Interest
on Nonperforming Loans |
|
|
— |
|
|
44 |
|
Acquired
Deposits |
|
|
1,524 |
|
|
1,165 |
|
Accrued
Estimated Outstanding Expense |
|
|
461 |
|
|
386 |
|
Other |
|
|
871 |
|
|
564 |
|
Total
Deferred Tax Assets |
|
$ |
8,057 |
|
$ |
7,331 |
|
Deferred
Tax Liabilities attributable to: |
|
|
|
|
|
|
|
Associate
Benefits |
|
$ |
— |
|
$ |
167 |
|
Unrealized
Gains on Investment Securities |
|
|
802 |
|
|
1,805 |
|
Depreciation
on Premises and Equipment |
|
|
2,852 |
|
|
2,051 |
|
Deferred
Loan Fees |
|
|
3,041 |
|
|
2,098 |
|
Securities
Accretion |
|
|
65 |
|
|
171 |
|
Other |
|
|
150 |
|
|
140 |
|
Total
Deferred Tax Liabilities |
|
|
6,910 |
|
|
6,432 |
|
Net
Deferred Tax Assets |
|
$ |
1,147 |
|
$ |
899 |
|
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) |
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
Tax
Expense at Federal Statutory Rate |
|
$ |
13,571 |
|
$ |
12,521 |
|
$ |
9,094 |
|
Increases
(Decreases) Resulting From: |
|
|
|
|
|
|
|
|
|
|
Tax-Exempt
Interest Income |
|
|
(957 |
) |
|
(1,084 |
) |
|
(1,179 |
) |
State
Taxes, Net of Federal Benefit |
|
|
1,314 |
|
|
1,238 |
|
|
913 |
|
Other |
|
|
(348 |
) |
|
16 |
|
|
290 |
|
Actual
Tax Expense |
|
$ |
13,580 |
|
$ |
12,691 |
|
$ |
9,118 |
|
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 associate's
years of service and compensation during the years immediately preceding
retirement. The Company's general funding policy is to contribute amounts
deductible for federal income tax purposes.
The
following table details the components of pension expense, the funded status of
the plan, amounts recognized in the Company's consolidated statements of
financial condition, and major assumptions used to
determine these amounts.
(Dollars
in Thousands) |
|
|
2003 |
|
|
2002 |
|
|
2001
|
|
Change
in Projected Benefit Obligation: |
|
|
|
|
|
|
|
|
|
|
Benefit
Obligation at Beginning of Year |
|
$ |
37,941 |
|
$ |
33,642 |
|
$ |
26,811 |
|
Service
Cost |
|
|
3,302 |
|
|
2,842 |
|
|
2,732 |
|
Interest
Cost |
|
|
2,571 |
|
|
2,348 |
|
|
2,122 |
|
Actuarial
Loss |
|
|
3,196 |
|
|
1,671 |
|
|
2,052 |
|
Amendments
to Plan(1) |
|
|
— |
|
|
— |
|
|
1,553 |
|
Benefits
Paid |
|
|
(1,061 |
) |
|
(2,385 |
) |
|
(1,362 |
) |
Expenses
Paid |
|
|
(236 |
) |
|
(177 |
) |
|
(266 |
) |
Plan
Change(2) |
|
|
514 |
|
|
— |
|
|
— |
|
Projected
Benefit Obligation at End of Year |
|
$ |
46,227 |
|
$ |
37,941 |
|
$ |
33,642 |
|
|
|
|
|
|
|
|
|
|
|
|
Change
in Plan Assets: |
|
|
|
|
|
|
|
|
|
|
Fair
Value of Plan Assets at Beginning of Year |
|
$ |
27,423 |
|
$ |
30,113 |
|
$ |
31,319 |
|
Actual
Return on Plan Assets |
|
|
4,915 |
|
|
(3,357 |
) |
|
(1,493 |
) |
Employer
Contributions |
|
|
3,744 |
|
|
3,229 |
|
|
524 |
|
Amendments
to Plan(1) |
|
|
— |
|
|
— |
|
|
1,391 |
|
Benefits
Paid |
|
|
(1,061 |
) |
|
(2,385 |
) |
|
(1,362 |
) |
Expenses
Paid |
|
|
(237 |
) |
|
(177 |
) |
|
(266 |
) |
Fair
Value of Plan Assets at End of Year |
|
$ |
34,784 |
|
$ |
27,423 |
|
$ |
30,113 |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Funded Status: |
|
|
|
|
|
|
|
|
|
|
Funded
Status |
|
$ |
(11,443 |
) |
$ |
(10,518 |
) |
$ |
(3,529 |
) |
Unrecognized
Net Losses |
|
|
9,993 |
|
|
10,672 |
|
|
3,557 |
|
Unrecognized
Prior Service Cost |
|
|
1,732 |
|
|
1,434 |
|
|
1,718 |
|
Unrecognized
Net Transition Obligation |
|
|
— |
|
|
1 |
|
|
2 |
|
Prepaid
Benefit Cost |
|
$ |
282 |
|
$ |
1,589 |
|
$ |
1,748 |
|
|
|
|
|
|
|
|
|
|
|
|
Components
of Net Periodic Benefit Costs: |
|
|
|
|
|
|
|
|
|
|
Service
Cost |
|
$ |
3,302 |
|
$ |
2,842 |
|
$ |
2,732 |
|
Interest
Cost |
|
|
2,571 |
|
|
2,348 |
|
|
2,122 |
|
Expected
Return on Plan Assets |
|
|
(2,168 |
) |
|
(2,404 |
) |
|
(2,629 |
) |
Amortization
of Prior Service Cost |
|
|
216 |
|
|
284 |
|
|
327 |
|
Transition
Obligation Recognition |
|
|
1 |
|
|
1 |
|
|
(231 |
) |
Recognized
Net Actuarial Loss (Gain) |
|
|
1,127 |
|
|
317 |
|
|
(168 |
) |
Net
Periodic Benefit Cost |
|
$ |
5,049 |
|
$ |
3,388 |
|
$ |
2,153 |
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions: |
|
|
|
|
|
|
|
|
|
|
Weighted-average
used to determine benefit obligations: |
|
|
|
|
|
|
|
|
|
|
Discount
Rate |
|
|
6.25 |
% |
|
6.75 |
% |
|
7.25 |
% |
Expected
Return on Plan Assets |
|
|
8.25 |
% |
|
8.25 |
% |
|
8.25 |
% |
Rate
of Compensation Increase |
|
|
5.50 |
% |
|
5.50 |
% |
|
5.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
used to determine net cost: |
|
|
|
|
|
|
|
|
|
|
Discount
Rate |
|
|
6.75 |
% |
|
7.25 |
% |
|
7.25 |
% |
Expected
Return on Plan Assets |
|
|
8.25 |
% |
|
8.25 |
% |
|
8.25 |
% |
Rate
of Compensation Increase |
|
|
5.50 |
% |
|
5.50 |
% |
|
5.50 |
% |
(1) The
amendments to the plan are a result of acquisitions and the IRS regulation
regarding the change from the PBGC mortality table to the GATT mortality
table.
(2) Represents
a change in mortality assumptions set forth in IRC 417(e).
Return
on Plan Assets
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 and current benchmarks to arrive at expected long-term rates of
return in each asset category. The Company assumed that 65% of its portfolio
would be invested in equity securities, with the remainder invested in debt
securities.
Plan
Assets
The
Company’s pension plan asset allocation at year-end 2003 and 2002, and the
target asset allocation for 2004 are as follows:
|
|
|
Target Allocation |
|
|
Percentage of Plan
Assets at Year-End |
|
|
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
Equity
Securities |
|
|
65 |
% |
|
60 |
% |
|
50 |
% |
Debt
Securities |
|
|
35 |
% |
|
28 |
% |
|
31 |
% |
Real
Estate |
|
|
— |
|
|
— |
|
|
— |
|
Other |
|
|
— |
|
|
12 |
% |
|
19 |
% |
Total |
|
|
100 |
% |
|
100 |
% |
|
100 |
% |
The
Company’s pension plan assets are managed by the Investment Committee of Capital
City Trust Company. The Company’s 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.
Contributions
The
following table details the amounts contributed to the pension plan in 2003 and
2002, and the expected amount to be contributed in 2004.
|
|
|
2003 |
|
|
|
|
|
Expected
2004 |
|
Actual
Contributions |
|
$ |
3,743,763 |
|
$ |
3,229,278 |
|
$ |
4,000,000 |
|
Supplemental
Executive Retirement Plan
The
Company has a Supplemental Executive Retirement Plan ("SERP") covering selected
executives. Benefits under this plan generally are based on the executive's
years of service and compensation during the years immediately preceding
retirement. The Company recognized expense during 2003, 2002 and 2001 of
approximately $208,000, $393,000, and $214,000, respectively, and no minimum
liability, at December 31, 2003, 2002 and 2001.
The
following table details the components of the Supplemental Executive Retirement
Plan's periodic benefit cost, the funded status of the plan, amounts recognized
in the Company's consolidated statements of financial condition, and major
assumptions used to determine these amounts.
(Dollars
in Thousands) |
|
2003 |
|
2002 |
|
2001
|
|
Change
in Projected Benefit Obligation: |
|
|
|
|
|
|
|
|
|
|
Benefit
Obligation at Beginning of Year |
|
$ |
2,770 |
|
$ |
1,458 |
|
$ |
1,255 |
|
Service
Cost |
|
|
80 |
|
|
118 |
|
|
73 |
|
Interest
Cost |
|
|
111 |
|
|
169 |
|
|
102 |
|
Plan
Participants Contributions |
|
|
— |
|
|
— |
|
|
(111 |
) |
Actuarial
(Gain) Loss |
|
|
(1,107 |
) |
|
1,025 |
|
|
139 |
|
Plan
Change(1) |
|
|
26 |
|
|
— |
|
|
— |
|
Projected
Benefit Obligation at End of Year |
|
$ |
1,880 |
|
$ |
2,770 |
|
$ |
1,458 |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Funded Status: |
|
|
|
|
|
|
|
|
|
|
Funded
Status |
|
$ |
(1,880 |
) |
$ |
(2,770 |
) |
$ |
(1,458 |
) |
Unrecognized
Net Actuarial (Gain) Loss |
|
|
(418 |
) |
|
645 |
|
|
(333 |
) |
Unrecognized
Prior Service Cost |
|
|
511 |
|
|
546 |
|
|
605 |
|
Accrued
Benefit Cost |
|
$ |
(1,787 |
) |
$ |
(1,579 |
) |
$ |
(1,186 |
) |
|
|
|
|
|
|
|
|
|
|
|
Components
of Net Periodic Benefit Costs: |
|
|
|
|
|
|
|
|
|
|
Service
Cost |
|
$ |
80 |
|
$ |
118 |
|
$ |
73 |
|
Interest
Cost |
|
|
111 |
|
|
169 |
|
|
102 |
|
Amortization
of Prior Service Cost |
|
|
61 |
|
|
59 |
|
|
59 |
|
Recognized
Net Actuarial (Gain) Loss |
|
|
(44 |
) |
|
47 |
|
|
(20 |
) |
Net
Periodic Benefit Cost |
|
$ |
208 |
|
$ |
393 |
|
$ |
214 |
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions: |
|
|
|
|
|
|
|
|
|
|
Weighted-average
used to determine the benefit obligations: |
|
|
|
|
|
|
|
|
|
|
Discount
Rate |
|
|
6.25 |
% |
|
6.75 |
% |
|
7.25 |
% |
Expected
Return on Plan Assets |
|
|
8.25 |
% |
|
8.25 |
% |
|
8.25 |
% |
Rate
of Compensation Increase |
|
|
5.50 |
% |
|
5.50 |
% |
|
5.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
used to determine the net cost: |
|
|
|
|
|
|
|
|
|
|
Discount
Rate |
|
|
6.75 |
% |
|
7.25 |
% |
|
7.25 |
% |
Expected
Return on Plan Assets |
|
|
8.25 |
% |
|
8.25 |
% |
|
8.25 |
% |
Rate
of Compensation Increase |
|
|
5.50 |
% |
|
5.50 |
% |
|
5.50 |
% |
(1) Represents
a change in mortality assumptions set forth in IRC 417(e)
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. A total of 50,000 shares have been reserved for
issuance. 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 from the Company
are made up to 6% of the participant's compensation for some qualifying
associates. During 2003, the Company made matching contributions of $32,258.
There were no contributions made by the Company for 2002 and 2001. The
participant may choose to invest their contributions into fifteen investment
funds available to CCBG participants, including CCBG's common
stock.
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, CCBG did not issue any shares under this plan in 2003,
2002 and 2001.
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)(1) |
|
2003 |
|
2002 |
|
2001 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
Net
Income |
|
$ |
25,193 |
|
$ |
23,082 |
|
$ |
16,866 |
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
Denominator
for Basic Earnings Per Share |
|
|
|
|
|
|
|
|
|
|
Weighted-Average
Shares |
|
|
13,222,487 |
|
|
13,225,285 |
|
|
13,241,957 |
|
Effects
of Dilutive Securities |
|
|
|
|
|
|
|
|
|
|
Stock
Compensation Plans |
|
|
28,702 |
|
|
49,070 |
|
|
50,478 |
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for Diluted Earnings Per Share |
|
|
|
|
|
|
|
|
|
|
Adjusted
Weighted-Average Shares and |
|
|
|
|
|
|
|
|
|
|
Assumed
Conversions |
|
|
13,251,189 |
|
|
13,274,355 |
|
|
13,292,435 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings Per Share |
|
$ |
1.91 |
|
$ |
1.75 |
|
$ |
1.27 |
|
Diluted
Earnings per Share |
|
$ |
1.90 |
|
$ |
1.74 |
|
$ |
1.27 |
|
(1) All
share and per share data have been adjusted to reflect the 5-for-4 stock split
effective June 13, 2003.
Note
14
CAPITAL
The
Company is subject to various regulatory capital requirements which involve
quantitative measures of the Company's assets, liabilities and certain
off-balance sheet items. The Company's 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, 2003, 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, Capital City Bank, as of December 31, 2003 and December 31, 2002 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,
2003: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG |
$ |
175,631 |
|
|
12.88 |
% |
|
$ |
54,547 |
|
|
4.00 |
% |
|
|
* |
|
|
* |
|
CCB |
|
167,698 |
|
|
12.32 |
% |
|
|
54,438 |
|
|
4.00 |
% |
|
$ |
81,658 |
|
|
6.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG |
|
188,059 |
|
|
13.79 |
% |
|
|
109,094 |
|
|
8.00 |
% |
|
|
* |
|
|
* |
|
CCB |
|
180,126 |
|
|
13.24 |
% |
|
|
108,877 |
|
|
8.00 |
% |
|
|
136,096 |
|
|
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I Leverage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG |
|
175,631 |
|
|
9.51 |
% |
|
|
40,910 |
|
|
3.00 |
% |
|
|
* |
|
|
* |
|
CCB |
|
167,698 |
|
|
9.10 |
% |
|
|
40,829 |
|
|
3.00 |
% |
|
|
68,048 |
|
|
5.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2002: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG |
$ |
154,376 |
|
|
12.03 |
% |
|
$ |
51,340 |
|
|
4.00 |
% |
|
|
* |
|
|
* |
|
CCB |
|
150,360 |
|
|
11.73 |
% |
|
|
51,261 |
|
|
4.00 |
% |
|
$ |
76,891 |
|
|
6.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG |
|
166,871 |
|
|
13.00 |
% |
|
|
102,681 |
|
|
8.00 |
% |
|
|
* |
|
|
* |
|
CCB |
|
162,855 |
|
|
12.71 |
% |
|
|
102,522 |
|
|
8.00 |
% |
|
|
128,152 |
|
|
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I Leverage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBG |
|
154,376 |
|
|
8.46 |
% |
|
|
38,505 |
|
|
3.00 |
% |
|
|
* |
|
|
* |
|
CCB |
|
150,360 |
|
|
8.25 |
% |
|
|
38,446 |
|
|
3.00 |
% |
|
|
64,076 |
|
|
5.00 |
% |
*Not
applicable to bank holding companies.
Note
15
DIVIDEND
RESTRICTIONS
Substantially
all the Company’s 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 bank’s
net profits (as defined) for that year combined with its retained net profits
for the preceding two calendar years. In 2004, the bank subsidiary may declare
dividends without regulatory approval of $24.7 million plus an additional amount
equal to the net profits of the Company’s subsidiary bank for 2004 up to the
date of any such dividend declaration.
Note
16
RELATED
PARTY INFORMATION
DuBose
Ausley, a Director of the Company, is employed by and is the former Chairman of
Ausley & McMullen, the Company's general counsel. Fees paid by the Company
and its subsidiary for legal services, in aggregate, approximated $765,000,
$647,000, and $534,000 during 2003, 2002, and 2001, respectively.
Under a
lease agreement expiring in 2024, the Bank subsidiary 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 $85,000, to be adjusted for inflation in future
years.
At
December 31, 2003 and 2002, certain officers and directors were indebted to the
Company’s bank subsidiary in the aggregate amount of $17.8 million and $17.6
million, respectively. During 2003, $26.3 million in new loans were made and
repayments totaled $26.1 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.
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) |
|
2003 |
|
2002 |
|
2001
|
|
Noninterest
Income: |
|
|
|
|
|
|
|
|
|
|
Merchant
Fee Income |
|
$ |
4,563 |
|
$ |
3,715 |
|
$ |
3,612 |
|
Interchange
Commission Fees |
|
|
2,183 |
|
|
2,133 |
|
|
2,014 |
|
Noninterest
Expense: |
|
|
|
|
|
|
|
|
|
|
Professional
Fees |
|
|
1,918 |
|
|
1,895 |
|
|
1,301(1 |
) |
Printing
& Supplies |
|
|
1,742 |
|
|
1,772 |
|
|
1,757 |
|
Commission/Service
Fees |
|
|
4,181 |
|
|
3,464 |
|
|
2,863 |
|
Telephone |
|
|
1,872 |
|
|
1,832 |
|
|
1,617 |
|
(1)
Less than 1% of the appropriate threshold.
Note
18
FINANCIAL
INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISKS
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 customers. These
financial instruments consist of commitments to extend credit and standby
letters of credit.
The
Company’s maximum exposure to credit loss under standby letters of credit and
commitments to extend credit is represented by the contractual amount of those
instruments. The Company uses the same credit policies in establishing
commitments and issuing letters of credit as it does for on-balance sheet
instruments. As of December 31, 2003, the amounts associated with the Company’s
off-balance sheet obligations were as follows:
(Dollars in Thousands) |
|
|
Amount |
|
Commitments
to Extend Credit(1) |
|
$ |
290,311 |
|
Standby
Letters of Credit |
|
$ |
6,278 |
|
(1) |
Commitments
include unfunded loans, revolving lines of credit (including credit card
lines) and other unused
commitments. |
Commitments
to extend credit are agreements to lend to a customer 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.
Standby
letters of credit are conditional commitments issued by the Company to guarantee
the performance of a customer 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 customer’s creditworthiness on a case-by-case basis. The amount of
collateral obtained upon extension of credit is based on management’s 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.
Note
19
FAIR
VALUE OF FINANCIAL INSTRUMENTS
Many of
the Company’s 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.
The
methods and assumptions used to estimate the fair value of the Company’s other
financial instruments are as follows:
Investment
Securities - Fair values for investment securities are based on quoted market
prices. If a quoted market price is not available, fair value is estimated using
market prices for similar securities.
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. 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.
Long-Term
Debt - 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. Fair value of these fees is not material.
The
Company’s financial instruments that have estimated fair values are presented
below:
|
|
At
December 31, |
|
|
|
2003 |
|
2002 |
|
(Dollars in Thousands) |
|
Carrying Value |
|
Estimated Fair
Value |
|
Carrying Value |
|
Estimated Fair
Value |
|
Financial
Assets: |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
93,140 |
|
$ |
93,140 |
|
$ |
89,823 |
|
$ |
89,823 |
|
Short-Term
Investments |
|
|
125,452 |
|
|
125,452 |
|
|
170,936 |
|
|
170,936 |
|
Investment
Securities |
|
|
181,734 |
|
|
181,734 |
|
|
180,315 |
|
|
180,315 |
|
Loans,
Net of Allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
for
Loan Losses |
|
|
1,329,203 |
|
|
1,365,541 |
|
|
1,272,726 |
|
|
1,331,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Financial Assets |
|
$ |
1,729,529 |
|
$ |
1,765,867 |
|
$ |
1,713,800 |
|
$ |
1,772,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
1,474,205 |
|
$ |
1,486,539 |
|
$ |
1,434,200 |
|
$ |
1,438,964 |
|
Short-Term
Borrowings |
|
|
108,184 |
|
|
108,184 |
|
|
113,675 |
|
|
113,675 |
|
Long-Term
Debt |
|
|
46,475 |
|
|
47,270 |
|
|
71,745 |
|
|
72,631 |
|
Total
Financial Liabilities |
|
$ |
1,628,864 |
|
$ |
1,641,993 |
|
$ |
1,619,620 |
|
$ |
1,625,270 |
|
Certain
financial instruments and all nonfinancial instruments are excluded from the
above table. The disclosures also do not include certain intangible assets such
as customer relationships, deposit base intangibles and goodwill. Accordingly,
the aggregate fair value amounts presented do not represent the underlying value
of the Company.
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 Income
(Dollars in Thousands) |
|
2003 |
|
2002 |
|
2001 |
|
OPERATING
INCOME |
|
|
|
|
|
|
|
Income
Received from Subsidiary Bank: |
|
|
|
|
|
|
|
|
|
|
Dividends |
|
$ |
11,599 |
|
$ |
12,678 |
|
$ |
12,963 |
|
Overhead
Fees |
|
|
2,935 |
|
|
3,061 |
|
|
2,393 |
|
Other
Income |
|
|
— |
|
|
59 |
|
|
— |
|
Total
Operating Income |
|
|
14,534 |
|
|
15,798 |
|
|
15,356 |
|
OPERATING
EXPENSE |
|
|
|
|
|
|
|
Salaries
and Associate Benefits |
|
1,847 |
|
2,311 |
|
1,878 |
|
Interest
on Debt |
|
— |
|
7 |
|
83 |
|
Professional
Fees |
|
1,104 |
|
994 |
|
399 |
|
Advertising |
|
|
193 |
|
|
138 |
|
|
132 |
|
Legal
Fees |
|
|
374 |
|
|
197 |
|
|
85 |
|
Other |
|
|
404 |
|
|
335 |
|
|
285 |
|
Total
Operating Expense |
|
|
3,922 |
|
|
3,982 |
|
|
2,862 |
|
Income
Before Income Taxes and Equity |
|
|
|
|
|
|
|
|
|
|
in
Undistributed Earnings of Subsidiary Bank |
|
|
10,612 |
|
|
11,816 |
|
|
12,494 |
|
Income
Tax Benefit |
|
|
(278 |
) |
|
(248 |
) |
|
(124 |
) |
Income
Before Equity in Undistributed |
|
|
|
|
|
|
|
|
|
|
Earnings
of Subsidiary Bank |
|
|
10,890 |
|
|
12,064 |
|
|
12,618 |
|
Equity
in Undistributed Earnings |
|
|
|
|
|
|
|
|
|
|
of
Subsidiary Bank |
|
|
14,303 |
|
|
11,018 |
|
|
4,248 |
|
Net
Income |
|
$ |
25,193 |
|
$ |
23,082 |
|
$ |
16,866 |
|
The
following are condensed statements of financial condition of the parent company
at December 31:
Parent
Company Statements of Financial Condition
(Dollars in Thousands)(1) |
|
|
2003 |
|
|
2002 |
|
ASSETS |
|
|
|
|
|
|
|
Cash
and Due From Subsidiary Bank |
|
$ |
7,850 |
|
$ |
3,970 |
|
Investment
in Subsidiary Bank |
|
|
196,316 |
|
|
183,780 |
|
Other
Assets |
|
|
1,310 |
|
|
1,148 |
|
Total
Assets |
|
$ |
205,476 |
|
$ |
188,898 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Liabilities |
|
$ |
2,667 |
|
$ |
2,367 |
|
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; 13,236,462 and 13,196,211 |
|
|
|
|
|
|
|
shares
issued and outstanding at December 31, |
|
|
|
|
|
|
|
2003
and December 31, 2002, respectively |
|
|
132 |
|
|
132 |
|
Additional
Paid-In Capital |
|
|
16,157 |
|
|
14,691 |
|
Retained
Earnings |
|
|
185,134 |
|
|
168,587 |
|
Accumulated
Other Comprehensive Income, Net of Tax |
|
|
1,386 |
|
|
3,121 |
|
Total
Shareowners' Equity |
|
|
202,809 |
|
|
186,531 |
|
Total
Liabilities and Shareowners' Equity |
|
$ |
205,476 |
|
$ |
188,898 |
|
(1) All
share and per share data have been adjusted to reflect the 5-for-4 stock split
effective June 13, 2003.
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) |
|
2003 |
|
2002 |
|
2001
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Net
Income |
|
$ |
25,193 |
|
$ |
23,082 |
|
$ |
16,866 |
|
Adjustments
to Reconcile Net Income to |
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Operating Activities: |
|
|
|
|
|
|
|
|
|
|
Equity
in Undistributed |
|
|
|
|
|
|
|
|
|
|
Earnings
of Subsidiary Bank |
|
|
(14,303 |
) |
|
(11,018 |
) |
|
(4,248 |
) |
Non-Cash
Compensation |
|
|
508 |
|
|
892 |
|
|
489 |
|
(Increase)
Decrease in Other Assets |
|
|
(130 |
) |
|
(256 |
) |
|
206 |
|
Increase
(Decrease) in Other Liabilities |
|
|
300 |
|
|
(2,603 |
) |
|
386 |
|
Net
Cash Provided by Operating Activities |
|
|
11,568 |
|
|
10,097 |
|
|
13,699 |
|
CASH
FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Net
Cash Received From Acquisitions |
|
|
— |
|
|
— |
|
|
1,471 |
|
CASH
FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Borrowings
of Long-Term Debt |
|
|
— |
|
|
2,040 |
|
|
1,025 |
|
Repayments
of Long-Term Debt |
|
|
— |
|
|
(2,040 |
) |
|
(2,275 |
) |
Payment
of Dividends |
|
|
(8,646 |
) |
|
(6,644 |
) |
|
(6,376 |
) |
Repurchase
of Common Stock |
|
|
(17 |
) |
|
(3,395 |
) |
|
(4,942 |
) |
Issuance
of Common Stock |
|
|
975 |
|
|
688 |
|
|
435 |
|
Net
Cash Used in Financing Activities |
|
|
(7,688 |
) |
|
(9,351 |
) |
|
(12,133 |
) |
Net
Increase in Cash |
|
|
3,880 |
|
|
746 |
|
|
3,037 |
|
Cash
at Beginning of Period |
|
|
3,970 |
|
|
3,224 |
|
|
187 |
|
Cash
at End of Period |
|
$ |
7,850 |
|
$ |
3,970 |
|
$ |
3,224 |
|
Note
21
COMPREHENSIVE
INCOME
SFAS
No. 130, "Reporting Comprehensive Income," requires that certain transactions
and other economic events that bypass the income statement be displayed as other
comprehensive income (loss). The Company’s comprehensive income (loss) consists
of net income (loss) and changes in unrealized gains (losses) on securities
available-for-sale, net of income taxes. Changes in unrealized gains (losses)
(net of taxes) on securities are reported as other comprehensive (loss) income
and totaled ($1,735), $771, and $3,872, for 2003, 2002 and 2001, respectively.
Reclassification adjustments consist only of realized gains on sales of
investment securities and were not material for the years ended December 31,
2003, 2002 and 2001.
CAPITAL
CITY BANK GROUP, INC.
CONSOLIDATED
STATEMENTS OF INCOME
FOR
THE PERIODS ENDED SEPTEMBER 30
(Unaudited)
(Dollars
In Thousands, Except Per Share Amounts)
|
|
THREE MONTHS ENDED
SEPTEMBER 30, |
|
NINE MONTHS ENDED
SEPTEMBER 30, |
|
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
INTEREST
INCOME |
|
|
|
|
|
|
|
|
|
Interest
and Fees on Loans |
|
$ |
23,316 |
|
$ |
21,747 |
|
$ |
67,510 |
|
$ |
66,036 |
|
Investment
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury |
|
|
167 |
|
|
147 |
|
|
619 |
|
|
433 |
|
U.S.
Govt. Agencies and Corporations |
|
|
507 |
|
|
554 |
|
|
1,298 |
|
|
2,048 |
|
States
and Political Subdivisions |
|
|
468 |
|
|
592 |
|
|
1,491 |
|
|
1,833 |
|
Other
Securities |
|
|
55 |
|
|
141 |
|
|
191 |
|
|
470 |
|
Funds
Sold |
|
|
147 |
|
|
303 |
|
|
486 |
|
|
987 |
|
Total
Interest Income |
|
|
24,660 |
|
|
23,484 |
|
|
71,595 |
|
|
71,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
2,434 |
|
|
2,729 |
|
|
7,213 |
|
|
9,008 |
|
Short-Term
Borrowings |
|
|
332 |
|
|
282 |
|
|
868 |
|
|
951 |
|
Long-Term
Debt |
|
|
642 |
|
|
495 |
|
|
1,726 |
|
|
1,541 |
|
Total
Interest Expense |
|
|
3,408 |
|
|
3,506 |
|
|
9,807 |
|
|
11,500 |
|
Net
Interest Income |
|
|
21,252 |
|
|
19,978 |
|
|
61,788 |
|
|
60,307 |
|
Provision
for Loan Losses |
|
|
300 |
|
|
921 |
|
|
1,841 |
|
|
2,586 |
|
Net
Interest Income After |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for Loan Losses |
|
|
20,952 |
|
|
19,057 |
|
|
59,947 |
|
|
57,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST
INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
Charges on Deposit Accounts |
|
|
4,487 |
|
|
4,123 |
|
|
12,858 |
|
|
12,164 |
|
Data
Processing |
|
|
652 |
|
|
578 |
|
|
1,988 |
|
|
1,747 |
|
Asset
Management Fees |
|
|
1,035 |
|
|
660 |
|
|
2,726 |
|
|
1,915 |
|
(Loss)
Gain on Sale of |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Securities |
|
|
(13 |
) |
|
(22 |
) |
|
7 |
|
|
1 |
|
Mortgage
Banking Revenues |
|
|
806 |
|
|
2,066 |
|
|
2,486 |
|
|
4,950 |
|
Gain
on Sale of Credit Card Portfolio |
|
|
6,857 |
|
|
— |
|
|
6,857 |
|
|
— |
|
Other |
|
|
3,897 |
|
|
3,547 |
|
|
11,711 |
|
|
10,548 |
|
Total
Noninterest Income |
|
|
17,721 |
|
|
10,952 |
|
|
38,633 |
|
|
31,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST
EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and Associate Benefits |
|
|
10,966 |
|
|
10,551 |
|
|
32,515 |
|
|
30,444 |
|
Occupancy,
Net |
|
|
1,828 |
|
|
1,589 |
|
|
5,194 |
|
|
4,468 |
|
Furniture
and Equipment |
|
|
2,174 |
|
|
2,048 |
|
|
6,214 |
|
|
5,717 |
|
Conversion/Merger
Expense |
|
|
68 |
|
|
— |
|
|
114 |
|
|
— |
|
Other |
|
|
6,597 |
|
|
5,996 |
|
|
20,272 |
|
|
18,498 |
|
Total
Noninterest Expense |
|
|
21,633 |
|
|
20,184 |
|
|
64,309 |
|
|
59,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Before Income Taxes |
|
|
17,040 |
|
|
9,825 |
|
|
34,271 |
|
|
29,919 |
|
Income
Taxes |
|
|
6,221 |
|
|
3,529 |
|
|
12,162 |
|
|
10,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME |
|
$ |
10,819 |
|
$ |
6,296 |
|
$ |
22,109 |
|
$ |
19,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Net Income Per Share |
|
$ |
.82 |
|
$ |
.47 |
|
$ |
1.67 |
|
$ |
1.44 |
|
Diluted
Net Income Per Share |
|
$ |
.82 |
|
$ |
.47 |
|
$ |
1.67 |
|
$ |
1.44 |
|
Cash
Dividends Per Share |
|
$ |
.1800 |
|
$ |
.1700 |
|
$ |
.5400 |
|
$ |
.4760 |
|
Basic
Average Shares Outstanding |
|
|
13,282,945
|
|
|
3,221,264 |
|
|
13,272,125 |
|
|
13,221,114 |
|
Diluted
Average Shares Outstanding |
|
|
13,286,945
|
|
|
3,260,140 |
|
|
13,275,172 |
|
|
13,255,047 |
|
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
CAPITAL
CITY BANK GROUP, INC.
CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
AS
OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
(Unaudited)
(Dollars
In Thousands, Except Per Share Amounts)
|
|
|
September 30, 2004 |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Cash
and Due From Banks |
|
$ |
90,458 |
|
$ |
93,140 |
|
Funds
Sold |
|
|
47,352 |
|
|
125,452 |
|
Total
Cash and Cash Equivalents |
|
|
137,810 |
|
|
218,592 |
|
|
|
|
|
|
|
|
|
Investment
Securities, Available-for-Sale |
|
|
156,675 |
|
|
181,734 |
|
|
|
|
|
|
|
|
|
Loans,
Net of Unearned Interest |
|
|
1,540,650 |
|
|
1,341,632 |
|
Allowance
for Loan Losses |
|
|
(12,328 |
) |
|
(12,429 |
) |
Loans,
Net |
|
|
1,528,322 |
|
|
1,329,203 |
|
|
|
|
|
|
|
|
|
Premises
and Equipment |
|
|
56,281 |
|
|
54,011 |
|
Intangibles |
|
|
39,720 |
|
|
25,792 |
|
Other
Assets |
|
|
32,985 |
|
|
37,170 |
|
Total
Assets |
|
$ |
1,951,793 |
|
$ |
1,846,502 |
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest
Bearing Deposits |
|
$ |
518,352 |
|
$ |
455,550 |
|
Interest
Bearing Deposits |
|
|
1,052,195 |
|
|
1,018,655 |
|
Total
Deposits |
|
|
1,570,547 |
|
|
1,474,205 |
|
|
|
|
|
|
|
|
|
Short-Term
Borrowings |
|
|
76,216 |
|
|
108,184 |
|
Long-Term
Debt |
|
|
62,930 |
|
|
46,475 |
|
Other
Liabilities |
|
|
23,031 |
|
|
14,829 |
|
Total
Liabilities |
|
|
1,732,724 |
|
|
1,643,693 |
|
|
|
|
|
|
|
|
|
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; 13,285,380 shares |
|
|
|
|
|
|
|
outstanding
at September 30, 2004 |
|
|
|
|
|
|
|
and
13,236,462 shares outstanding at |
|
|
|
|
|
|
|
December
31, 2003 |
|
|
133 |
|
|
132 |
|
Additional
Paid-In Capital |
|
|
18,411 |
|
|
16,157 |
|
Retained
Earnings |
|
|
200,073 |
|
|
185,134 |
|
Accumulated
Other Comprehensive Income, |
|
|
|
|
|
|
|
Net
of Tax |
|
|
452 |
|
|
1,386 |
|
Total
Shareowners' Equity |
|
|
219,069 |
|
|
202,809 |
|
Total
Liabilities and Shareowners' Equity |
|
$ |
1,951,793 |
|
$ |
1,846,502 |
|
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
CAPITAL
CITY BANK GROUP, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30
(Unaudited)
(Dollars
In Thousands)
|
|
2004 |
|
2003
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net
Income |
|
$ |
22,109 |
|
$ |
19,097 |
|
Adjustments
to Reconcile Net Income to Net |
|
|
|
|
|
|
|
Cash
Provided by Operating Activities: |
|
|
|
|
|
|
|
Provision
for Loan Losses |
|
|
1,841 |
|
|
2,586 |
|
Depreciation |
|
|
3,877 |
|
|
3,543 |
|
Net
Securities Amortization |
|
|
1,673 |
|
|
1,545 |
|
Amortization
of Intangible Assets |
|
|
2,673 |
|
|
2,431 |
|
Gain
on Sale of Investment Securities |
|
|
(7 |
) |
|
(1 |
) |
Non-Cash
Compensation |
|
|
1,686 |
|
|
850 |
|
Net
Decrease in Other Assets |
|
|
5,762 |
|
|
2,799 |
|
Net
Increase in Other Liabilities |
|
|
8,265 |
|
|
1,200 |
|
Net
Cash Provided by Operating Activities |
|
|
47,879 |
|
|
34,050 |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
Proceeds
from Payments/Maturities/Sales of |
|
|
|
|
|
|
|
Investment
Securities Available-for-Sale |
|
|
119,650 |
|
|
76,114 |
|
Purchase
of Investment Securities Available-for-Sale |
|
|
(81,594 |
) |
|
(62,184 |
) |
Net
Increase in Loans |
|
|
(113,296 |
) |
|
(41,599 |
) |
Net
Cash Used in Acquisition |
|
|
(18,079 |
) |
|
— |
|
|
|
|
|
|
|
|
|
Purchase
of Premises & Equipment |
|
|
(5,145 |
) |
|
(10,051 |
) |
|
|
|
|
|
|
|
|
Sales
of Premises & Equipment |
|
|
1,010 |
|
|
57 |
|
Net
Cash Used in Investing Activities |
|
|
(97,454 |
) |
|
(37,663 |
) |
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
Net
(Decrease) Increase in Deposits |
|
|
(6,093 |
) |
|
51,241 |
|
|
|
|
|
|
|
|
|
Net
Decrease in Short-Term Borrowings |
|
|
(46,968 |
) |
|
(41,746 |
) |
Borrowing
of Long-Term Debt |
|
|
29,737 |
|
|
7,612 |
|
Repayment
of Long-Term Debt |
|
|
(1,281 |
) |
|
(1,015 |
) |
|
|
|
|
|
|
|
|
Dividends
Paid |
|
|
(7,169 |
) |
|
(6,289 |
) |
Issuance
of Common Stock |
|
|
569 |
|
|
37 |
|
Net
Cash (Used In) Provided by Financing Activities |
|
|
(31,205 |
) |
|
9,840 |
|
|
|
|
|
|
|
|
|
Net
(Decrease) Increase in Cash and Cash
Equivalents |
|
|
(80,780 |
) |
|
6,227 |
|
Cash
and Cash Equivalents at Beginning of Period |
|
|
218,592 |
|
|
260,759 |
|
Cash
and Cash Equivalents at End of Period |
|
$ |
137,810 |
|
$ |
266,986 |
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure: |
|
|
|
|
|
|
|
Interest
Paid on Deposits |
|
$ |
7,263 |
|
$ |
9,455 |
|
Interest
Paid on Debt |
|
$ |
2,616 |
|
$ |
2,499 |
|
Transfer
of Loans to ORE |
|
$ |
1,063 |
|
$ |
1,275 |
|
Income
Taxes Paid |
|
$ |
6,786 |
|
$ |
12,560 |
|
Issuance
of Common Stock as Non-Cash Compensation |
|
$ |
1,686 |
|
$ |
850 |
|
Transfer
of Current Portion of Long-Term Debt to |
|
|
|
|
|
|
|
Short-Term
Borrowings |
|
$ |
15,000 |
|
$ |
40,326 |
|
The
accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
CAPITAL
CITY BANK GROUP, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(1)
MANAGEMENT'S OPINION AND ACCOUNTING POLICIES
Basis
of Presentation
The
consolidated financial statements included herein have been prepared by Capital
City Bank Group, Inc. (the “Company”), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, including Regulation S-X.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations. Prior period financial statements have been reformatted
and/or amounts reclassified, as necessary, to conform with the current
presentation.
In the
opinion of management, the consolidated financial statements contain all
adjustments, which are those of a recurring nature, and disclosures necessary to
present fairly the financial position of the Company as of September 30, 2004
and December 31, 2003, the results of operations for the three and nine month
periods ended September 30, 2004 and 2003, and cash flows for the nine month
periods ended September 30, 2004 and 2003.
The
Company and its subsidiary follow accounting principles generally accepted in
the United States of America and reporting practices applicable to the banking
industry. The principles that materially affect its financial position, results
of operations and cash flows are set forth in Notes to Consolidated Financial
Statements for the year ended December 31, 2003 and which are included in this
Proxy Statement/Prospectus in Section XII, beginning on page 236.
Stock-based
Compensation
As of
September 30, 2004, the Company had three stock-based compensation plans,
consisting of the Associate Stock Incentive Plan ("AIP"), the Associate Stock
Purchase Plan and the Director Stock Purchase Plan. Pursuant to the AIP, the
Company executed an executive incentive stock option arrangement effective
January 1, 2004. As a result of SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," the Company adopted the fair value
recognition provisions of SFAS No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," prospectively to all awards granted, modified, or settled on or
after January 1, 2003. Awards under the Company’s plans vest over periods
ranging from six months to four years. Therefore, the cost related to
stock-based associate compensation included in the determination of net income
for 2003 is different than that which would have been recognized if the fair
value based method had been applied to all awards since the original effective
date of SFAS 123, as a result of the difference between compensation measurement
dates under SFAS 123 and APB 25, the differences in what instruments are
considered non-compensatory, and the fact that awards granted prior to January
1, 2003 were accounted for under APB 25. The cost related to all stock-based
associate compensation included in net income is accounted for under the fair
value based method during 2004 as all awards have grant dates after January 1,
2003.
The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of SFAS 123 to
stock-based compensation.
|
|
|
THREE MONTHS ENDED SEPTEMBER
30, |
|
|
NINE MONTHS ENDED SEPTEMBER 30, |
|
(Dollars in Thousands, Except Per Share
Data) |
|
|
2004 |
|
|
2003 |
|
|
2004 |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income, as reported |
|
$ |
10,819 |
|
$ |
6,296 |
|
$ |
22,109 |
|
$ |
19,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add:
Stock-based employee |
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
expense included |
|
|
|
|
|
|
|
|
|
|
|
|
|
in
reported net income, net of |
|
|
|
|
|
|
|
|
|
|
|
|
|
related
tax effects |
|
|
78 |
|
|
320 |
|
|
258 |
|
|
541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deduct:
Total stock-based employee |
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
expense determined |
|
|
|
|
|
|
|
|
|
|
|
|
|
under
fair value based method |
|
|
|
|
|
|
|
|
|
|
|
|
|
for
all awards, net of related |
|
|
|
|
|
|
|
|
|
|
|
|
|
tax
effects |
|
|
(78 |
) |
|
(104 |
) |
|
(258 |
) |
|
(334 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
forma net income |
|
$ |
10,819 |
|
$ |
6,512 |
|
$ |
22,109 |
|
$ |
19,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic—as
reported |
|
$ |
.82 |
|
$ |
.47 |
|
$ |
1.67 |
|
$ |
1.44 |
|
Basic—pro
forma |
|
$ |
.82 |
|
$ |
.49 |
|
$ |
1.67 |
|
$ |
1.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted—as
reported |
|
$ |
.82 |
|
$ |
.47 |
|
$ |
1.67 |
|
$ |
1.44 |
|
Diluted—pro
forma |
|
$ |
.82 |
|
$ |
.49 |
|
$ |
1.67 |
|
$ |
1.46 |
|
(2)
ACQUISITIONS
On March
19, 2004, the Company's subsidiary, Capital City Bank, completed its merger with
Quincy State Bank, a subsidiary of Synovus Financial Corp. Results of Quincy
State Bank's operations have been included in the Company's consolidated
financial statements since March 20, 2004. Quincy State Bank had $116.6 million
in assets with one office in Quincy, Florida and one office in Havana, Florida.
The transaction was accounted for as a purchase and resulted in approximately
$15.4 million of intangible assets, including approximately $13.0 million in
goodwill and a core deposit intangible of $2.4 million. The core deposit
intangible is being amortized over a 7-year period.
The
information below lists the consolidated assets and liabilities of Quincy State
Bank as of March 19, 2004, along with the consideration paid:
(Dollars in Thousands) |
|
|
Quincy State Bank |
|
Cash
and Due From Banks |
|
$ |
2,295 |
|
Funds
Sold |
|
|
6,949 |
|
Total
Cash and Cash Equivalents |
|
|
9,244 |
|
Investment
Securities, Available-for-Sale |
|
|
16,150 |
|
Loans,
Net of Unearned Interest |
|
|
88,727 |
|
Intangible
Asset |
|
|
14,915 |
|
Other
Assets |
|
|
2,498 |
|
Total
Assets |
|
$ |
131,534 |
|
Total
Deposits |
|
$ |
102,434 |
|
Long-Term
Debt |
|
|
3,000 |
|
Total
Liabilities |
|
$ |
105,434 |
|
Consideration
Paid to |
|
|
|
|
Quincy
State Bank Shareowners |
|
$ |
26,100 |
|
The
following unaudited pro forma financial information for the three and nine
months ended September 30, 2004 and 2003 presents the consolidated operations of
the Company as if the Quincy State Bank acquisition had been made on January 1,
2003. The unaudited pro forma financial information is provided for
informational purposes only, should not be construed to be indicative of the
Company's consolidated results of operations had the acquisition of Quincy State
Bank been consummated on this earlier date, and does not project the Company's
results of operations for any future period:
(Dollars in Thousands, |
|
For 3 Months Ended
September 30, |
|
For 9 Months Ended
September 30, |
|
Except
Per Share Data) |
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
Interest
Income |
|
$ |
24,660 |
|
$ |
25,153 |
|
$ |
73,064 |
|
$ |
77,030 |
|
Interest
Expense |
|
|
3,408 |
|
|
3,801 |
|
|
10,012 |
|
|
12,494 |
|
Net
Interest Income |
|
|
21,252 |
|
|
21,352 |
|
|
63,052 |
|
|
64,536 |
|
Provision
for Loan Losses |
|
|
300 |
|
|
966 |
|
|
1,871 |
|
|
2,721 |
|
Net
Interest Income After |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for Loan Losses |
|
|
20,952 |
|
|
20,386 |
|
|
61,181 |
|
|
61,815 |
|
Noninterest
Income |
|
|
17,721 |
|
|
11,303 |
|
|
38,972 |
|
|
32,666 |
|
Noninterest
Expense |
|
|
21,633 |
|
|
20,953 |
|
|
65,130 |
|
|
61,955 |
|
Income
Before Income Taxes |
|
|
17,040 |
|
|
10,736 |
|
|
35,023 |
|
|
32,526 |
|
Income
Taxes |
|
|
6,221 |
|
|
3,848 |
|
|
12,425 |
|
|
11,899 |
|
Net
Income |
|
$ |
10,819 |
|
$ |
6,888 |
|
$ |
22,598 |
|
$ |
20,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Net Income Per Share |
|
$ |
.82 |
|
$ |
.52 |
|
$ |
1.70 |
|
$ |
1.56 |
|
Diluted
Net Income Per Share |
|
$ |
.82 |
|
$ |
.52 |
|
$ |
1.70 |
|
$ |
1.56 |
|
On March
19, 2004, the Company completed its purchase of fiduciary assets from Synovus
Trust Company for $2.0 million. This purchase was subject to a $800,000 earn-out
agreement of which $634,000 was paid in October 2004. Subsequently, the
intangible asset associated with this transaction was increased to $1.8 million.
This intangible is being amortized over a 10-year period.
On
October 15, 2004, the Company completed its acquisition of Farmers and Merchants
Bank in Dublin, Georgia, a $395 million asset institution with three offices in
Laurens County. The Company issued 17.08 shares and $666.50 in cash for each of
the 50,000 shares of Farmers and Merchants Bank, resulting in the issuance of
854,000 shares of Company common stock and the payment of $33.3 million in cash
for a total purchase price of approximately $66.7 million.
(3)
INVESTMENT SECURITIES
The
carrying value and related market value of investment securities at September
30, 2004 and December 31, 2003 were as follows (dollars in
thousands):
|
|
|
September 30, 2004 |
|
Available-For-Sale |
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Market
Value |
|
U.S.
Treasury |
|
$ |
31,189 |
|
$ |
3 |
|
$ |
118 |
|
$ |
31,074 |
|
U.S.
Govt. Agencies and Corporations |
|
|
58,488 |
|
|
63 |
|
|
201 |
|
|
58,350 |
|
States
and Political Subdivisions |
|
|
49,711 |
|
|
764 |
|
|
18 |
|
|
50,457 |
|
Mortgage-Backed
Securities |
|
|
10,869 |
|
|
219 |
|
|
11 |
|
|
11,077 |
|
Other
Securities |
|
|
5,717 |
|
|
— |
|
|
— |
|
|
5,717 |
|
Total |
|
$ |
155,974 |
|
$ |
1,049 |
|
$ |
348 |
|
$ |
156,675 |
|
|
|
|
December 31, 2003 |
|
Available-For-Sale |
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Market Value |
|
U.S.
Treasury |
|
$ |
78,498 |
|
$ |
105 |
|
$ |
1 |
|
$ |
78,602 |
|
U.S.
Govt. Agencies and Corporations |
|
|
26,862 |
|
|
133 |
|
|
— |
|
|
26,995 |
|
States
and Political Subdivisions |
|
|
55,641 |
|
|
1,511 |
|
|
— |
|
|
57,152 |
|
Mortgage-Backed
Securities |
|
|
11,618 |
|
|
427 |
|
|
— |
|
|
12,045 |
|
Other
Securities |
|
|
6,927 |
|
|
13 |
|
|
— |
|
|
6,940 |
|
Total |
|
$ |
179,546 |
|
$ |
2,189 |
|
$ |
1 |
|
$ |
181,734 |
|
(4)
LOANS
The
composition of the Company's loan portfolio at September 30, 2004 and December
31, 2003 was as follows (dollars in thousands):
|
|
|
September 30, 2004 |
|
|
December
31, 2003 |
|
Commercial,
Financial and Agricultural |
|
$ |
187,862 |
|
$ |
160,048 |
|
Real
Estate - Construction |
|
|
119,248 |
|
|
89,149 |
|
Real
Estate - Commercial Mortgage |
|
|
473,874 |
|
|
391,250 |
|
Real
Estate - Residential |
|
|
369,473 |
|
|
327,212 |
|
Real
Estate - Home Equity |
|
|
145,408 |
|
|
116,810 |
|
Real
Estate - Loans Held-for-Sale |
|
|
5,636 |
|
|
4,240 |
|
Consumer |
|
|
217,619 |
|
|
233,395 |
|
Other
Loans(1) |
|
|
21,530 |
|
|
19,528 |
|
Loans,
Net of Unearned Interest |
|
$ |
1,540,650 |
|
$ |
1,341,632 |
|
(1) Consists
primarily of loans-in-process.
(5)
ALLOWANCE FOR LOAN LOSSES
An
analysis of the changes in the allowance for loan losses for the nine month
periods ended September 30, 2004 and 2003, is as follows (dollars in
thousands):
|
|
|
September
30, |
|
|
|
|
2004 |
|
|
2003 |
|
Balance,
Beginning of the Period |
|
$ |
12,429 |
|
$ |
12,495 |
|
Provision
for Loan Losses |
|
|
1,841 |
|
|
2,586 |
|
Recoveries
on Loans Previously Charged-Off |
|
|
1,267 |
|
|
724 |
|
Loans
Charged-Off |
|
|
(3,722 |
) |
|
(3,381 |
) |
Acquired
Reserves |
|
|
1,313 |
|
|
— |
|
Reserve
Reversal - Credit Card Portfolio Sale |
|
|
(800 |
) |
|
— |
|
Balance,
End of Period |
|
$ |
12,328 |
|
$ |
12,424 |
|
Impaired
loans are primarily defined as all nonaccruing loans for the loan categories
which are included within the scope of SFAS 114. Selected
information pertaining to impaired loans is depicted in the table below (dollars
in thousands):
|
|
|
September
30, |
|
|
|
|
2004 |
|
|
2003 |
|
Impaired Loans: |
|
|
Balance |
|
|
|
|
|
Balance |
|
|
|
|
With
Related Credit Allowance |
|
$ |
940 |
|
$ |
429 |
|
$ |
4,112 |
|
$ |
605 |
|
Without
Related Credit Allowance |
|
|
3,266 |
|
|
— |
|
|
1,017 |
|
|
— |
|
Average
Recorded Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
for
the Period |
|
|
5,080 |
|
|
* |
|
|
7,091 |
|
|
* |
|
* Not
Applicable
The
Company recognizes income on impaired loans primarily on the cash basis. Any
change in the present value of expected cash flows is recognized through the
allowance for loan losses. For the
periods ended September 30, 2004 and 2003, the Company recognized $107,000 and
$148,000, respectively, in interest income on impaired loans, all of which was
collected in cash.
(6)
DEPOSITS
The
composition of the Company's interest bearing deposits at September 30, 2004 and
December 31, 2003 was as follows (dollars in thousands):
|
|
September 30, 2004 |
|
December 31, 2003 |
|
NOW
Accounts |
|
$ |
285,851 |
|
$ |
276,934 |
|
Money
Market Accounts |
|
|
209,262 |
|
|
207,934 |
|
Savings
Deposits |
|
|
129,461 |
|
|
110,834 |
|
Other
Time Deposits |
|
|
427,621 |
|
|
422,953 |
|
Total
Interest Bearing Deposits |
|
$ |
1,052,195 |
|
$ |
1,018,655 |
|
(7)
INTANGIBLE ASSETS
The
Company had intangible assets of $39.7 million and $25.8 million at September
30, 2004 and December 31, 2003, respectively. Intangible assets were as follows
(dollars in thousands):
|
|
|
September 30, 2004
|
|
|
December 31, 2003 |
|
|
|
|
Gross
Amount
|
|
|
Accumulated
Amortization |
|
|
|
|
|
Accumulated
Amortization |
|
Core
Deposits Intangibles |
|
$ |
36,144 |
|
$ |
17,247 |
|
$ |
33,752 |
|
$ |
14,640 |
|
Goodwill |
|
|
23,442 |
|
|
3,786 |
|
|
10,466 |
|
|
3,786 |
|
Other |
|
|
1,233 |
|
|
66 |
|
|
— |
|
|
— |
|
Total
Intangible Assets |
|
$ |
60,819 |
|
$ |
21,099 |
|
$ |
44,218 |
|
$ |
18,426 |
|
Net
Core Deposit Intangibles: As of
September 30, 2004 and December 31, 2003, the Company had core deposit
intangibles of $18.9 million and $19.1 million, respectively. Amortization
expense for the first nine months of 2004 and 2003 was $2.6 million and $2.4
million, respectively.
Goodwill:
As of
September 30, 2004 and December 31, 2003, the Company had goodwill, net of
accumulated amortization, of $19.7 million and $6.7 million, respectively. The
increase in goodwill is due to the acquisition of Quincy State Bank in March
2004. Goodwill is the Company's only intangible asset that is no longer subject
to amortization under the provisions of SFAS No. 142.
Other: As of
September 30, 2004, the Company had a customer relationship intangible, net of
accumulated amortization, of $1.2 million. This intangible was booked as a
result of the March 2004 acquisition of trust customer relationships from
Synovus Trust Company. Amortization expense for the first nine months of 2004
was $66,000. Estimated annual amortization expense is $120,000 based on use of a
10 year useful life.
(8)
EMPLOYEE BENEFIT PLANS
The
components of the net periodic benefit costs for the Company's qualified benefit
pension plan were as follows:
|
|
|
Three
Months Ended
September
30, |
|
|
|
Nine Months Ended
September 30, |
|
(Dollars in Thousands) |
|
|
2004 |
|
|
|
2003 |
|
|
|
2004 |
|
|
|
2003 |
|
Discount
rate |
|
|
6.25 |
% |
|
|
6.75 |
% |
|
|
6.25 |
% |
|
|
6.75 |
% |
Long-term
rate of return on assets |
|
|
8.00 |
% |
|
|
8.25 |
% |
|
|
8.00 |
% |
|
|
8.25 |
% |
Service
cost |
|
$ |
950 |
|
|
$ |
826 |
|
|
$ |
2,850 |
|
|
$ |
2,478 |
|
Interest
cost |
|
|
725 |
|
|
|
642 |
|
|
|
2,175 |
|
|
|
1,926 |
|
Expected
return on plan assets |
|
|
(675 |
) |
|
|
(542 |
) |
|
|
(2,025 |
) |
|
|
(1,626 |
) |
Transition
obligation amortization |
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
Prior
service cost amortization |
|
|
50 |
|
|
|
54 |
|
|
|
150 |
|
|
|
162 |
|
Net
loss amortization |
|
|
300 |
|
|
|
282 |
|
|
|
900 |
|
|
|
846 |
|
Net
periodic benefit cost |
|
$ |
1,350 |
|
|
$ |
1,263 |
|
|
$ |
4,050 |
|
|
$ |
3,787 |
|
The
components of the net periodic benefit costs for the Company's Supplemental
Executive Retirement Plan ("SERP") were as follows:
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September
30, |
|
(Dollars
in Thousands) |
|
|
2004 |
|
|
2003 |
|
|
2004 |
|
|
2003 |
|
Discount
rate |
|
|
6.25 |
% |
|
6.75 |
% |
|
6.25 |
% |
|
6.75 |
% |
Long-term
rate of return on assets |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
Service
cost |
|
$ |
48 |
|
$ |
20 |
|
$ |
144 |
|
$ |
60 |
|
Interest
cost |
|
|
65 |
|
|
28 |
|
|
195 |
|
|
84 |
|
Expected
return on plan assets |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
Prior
service cost amortization |
|
|
30 |
|
|
15 |
|
|
90 |
|
|
45 |
|
Net
loss amortization |
|
|
(18 |
) |
|
(11 |
) |
|
(54 |
) |
|
(33 |
) |
Net
periodic benefit cost |
|
$ |
125 |
|
$ |
52 |
|
$ |
375 |
|
$ |
156 |
|
(9)
COMPREHENSIVE INCOME
SFAS No.
130, "Reporting Comprehensive Income," requires that certain transactions and
other economic events that bypass the income statement be displayed as other
comprehensive income. The Company’s comprehensive income (loss) consists of net
income and changes in unrealized gains on securities available-for-sale, net of
income taxes. Changes in unrealized gains (losses), net of taxes, on securities
are reported as other comprehensive income (loss) and totaled $431,000 and
$(934,000), respectively, for the three and nine months ended September 30,
2004, and $(743,000) and $(1.3 million), respectively, for the three and nine
months ended September 30, 2003. Reclassification adjustments consist only of
realized gains on sales of investment securities and were not material for the
nine months ended September 30, 2004 and 2003.
Part
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM 20.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The
Florida Business Corporation Act grants each corporation organized thereunder
the power to indemnify its officers, directors, employees and agents on certain
conditions against liabilities arising out of any action or proceeding to which
any of them is a party by reason of being such officer, director, employee or
agent. The Florida Business Corporation Act permits a Florida corporation, with
the approval of its shareowners, to include within its articles of incorporation
a provision eliminating or limiting the personal liability of its directors to
such corporation or its shareowners for monetary damages resulting from certain
breaches of the directors’ fiduciary duty of care, both in suits by or on behalf
of the corporation and in actions by shareowners of the
corporation.
CCBG’s
Articles of Incorporation and Bylaws include provisions which allow CCBG to take
advantage of such provisions of the Florida Business Corporation Act. The CCBG
Articles of Incorporation and Bylaws also provide for the indemnification, to
the fullest extent permitted by the Florida Business Corporation Act, of
officers and directors of CCBG. CCBG currently maintains policies of insurance
under which the directors and officers of CCBG are insured, within the limits
and subject to the limitations of the policies, against specified expenses in
connection with the defense of actions, suits or proceedings to which they are
parties by reason of being or having been such directors or
officers.
ITEM 21.
EXHIBITS.
The
following exhibits are filed herein or have been, as noted, previously
filed:
Exhibit No. |
|
Description |
|
2.1
|
|
Agreement
and Plan of Merger, dated as of February 3, 2005, by and among Capital
City Bank Group, Inc., First Alachua Banking Corporation and First
National Bank of Alachua (Included in Section VIII of the Proxy
Statement/Prospectus included in this Registration
Statement). |
|
5.1 |
|
Form
of Opinion of Gunster, Yoakley & Stewart, P.A. regarding the legality
of the securities being offered hereby. |
|
8.1 |
|
Form
of Opinion of Gunster, Yoakley & Stewart, P.A. as to federal income
tax consequences. |
|
8.2 |
|
Form
of Opinion of Smith, Gambrell & Russell, LLP as to the federal income
tax consequences. |
|
23.1 |
|
Consent
of KPMG LLP. |
|
23.2 |
|
Consent
of Gunster, Yoakley & Stewart, P.A. (Included as part of the opinions
contained in Exhibits 5.1 and 8.1 herein). |
|
23.3 |
|
Consent
of Smith, Gambrell & Russell, LLP (Included as part of the opinion
contained in Exhibit 8.2 herein). |
|
23.4 |
|
Consent
of SunTrust Robinson Humphrey (Included as part of the Fairness Opinion
contained in Section XI of the Proxy Statement/Prospectus included in this
Registration Statement). |
|
24.1
|
|
A
power of attorney where various individuals authorize the signing of their
names to any and all amendments to this registration statement and other
documents submitted in connection herewith is contained on the first page
of the signature pages following Part II of this registration
statement. |
|
99.1 |
|
Form
of Proxy of First Alachua Banking Corporation |
|
ITEM 22.
UNDERTAKINGS.
The
undersigned Registrant hereby undertakes:
(1) Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(2) To supply
by means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(3) That
prior to any public reoffering of the securities registered hereunder through
the use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(4) That
every prospectus: (i) that is filed pursuant to Paragraph (3) immediately
preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of
the Act and is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering
thereof.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tallahassee, State of Florida, on March 7,
2005.
|
|
|
|
Capital City Bank Group,
Inc. |
|
|
|
|
By: |
/s/ William G. Smith,
Jr. |
|
|
|
William G. Smith, Jr., Chairman,
President
and Chief Executive
Officer |
KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints J. Kimbrough Davis and William G. Smith, Jr., or either
one of them (with full power to act alone), his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign and execute on behalf of the undersigned any and all
amendments to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection with any such amendments, as
fully to all intents and purposes as he or she might or could do in person, and
does hereby ratify and confirm all that said attorneys-in-fact and agents, or
their respective substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature |
|
Title |
Date |
|
|
|
|
/s/
William G. Smith, Jr. |
|
Chairman,
President and Chief Executive Officer |
March
7, 2005 |
William
G. Smith, Jr. |
|
(Principal
Executive Officer) |
|
|
|
|
|
/s/
J. Kimbrough Davis |
|
Executive
Vice President and Chief Financial Officer |
March
7, 2005 |
J.
Kimbrough Davis |
|
(Principal
Financial and Accounting
Officer) |
|
|
|
|
|
/s/
DuBose Ausley |
|
Director |
March
7, 2005 |
DuBose
Ausley |
|
|
|
|
|
|
|
/s/
Thomas A. Barron |
|
Director |
March
7, 2005 |
Thomas
A. Barron |
|
|
|
|
|
|
|
/s/
Frederick Carroll, III |
|
Director |
March
7, 2005 |
Frederick
Carroll, III |
|
|
|
|
|
|
|
/s/
Cader B. Cox, III |
|
Director |
March
7, 2005 |
Cader
B. Cox, III
|
|
|
|
/s/
J. Everitt Drew |
|
Director |
March
7, 2005 |
J.
Everitt Drew |
|
|
|
|
|
|
|
/s/
John Kent Humphress |
|
Director |
March
7, 2005 |
John
Kent Humphress |
|
|
|
|
|
|
|
/s/
L. McGrath Keen, Jr. |
|
Director |
March
7, 2005 |
L.
McGrath Keen, Jr. |
|
|
|
|
|
|
|
/s/
Lina S. Knox |
|
Director |
March
7, 2005 |
Lina
S. Knox |
|
|
|
|
|
|
|
/s/
Ruth A. Knox |
|
Director |
March
7, 2005 |
Ruth
A. Knox |
|
|
|
|
|
|
|
/s/
John R. Lewis |
|
Director |
March
7, 2005 |
John
R. Lewis |
|
|
|
|
|
|
|
/s/
Henry Lewis III |
|
Director |
March
7, 2005 |
Henry
Lewis III |
|
|
|
EXHIBIT
INDEX
Exhibit
No. |
|
Description |
2.1
|
|
Agreement
and Plan of Merger, dated as of February 3, 2005, by and among Capital
City Bank Group, Inc., First Alachua Banking Corporation and First
National Bank of Alachua (Included in Section VIII of the Proxy
Statement/Prospectus included in this Registration
Statement). |
5.1 |
|
Form
of Opinion of Gunster, Yoakley & Stewart, P.A. regarding the legality
of the securities being offered hereby. |
8.1 |
|
Form
of Opinion of Gunster, Yoakley & Stewart, P.A. as to federal income
tax consequences. |
8.2 |
|
Form
of Opinion of Smith, Gambrell & Russell, LLP as to the federal income
tax consequences. |
23.1 |
|
Consent
of KPMG LLP. |
23.2 |
|
Consent
of Gunster, Yoakley & Stewart, P.A. (Included as part of the opinions
contained in Exhibits 5.1 and 8.1 herein). |
23.3 |
|
Consent
of Smith, Gambrell & Russell, LLP (Included as part of the opinion
contained in Exhibit 8.2 herein). |
23.4 |
|
Consent
of SunTrust Robinson Humphrey (Included as part of the Fairness Opinion
contained in Section XI of the Proxy Statement/Prospectus included in this
Registration Statement). |
24.1
|
|
A
power of attorney where various individuals authorize the signing of their
names to any and all amendments to this registration statement and other
documents submitted in connection herewith is contained on the first page
of the signature pages following Part II of this registration
statement. |
99.1 |
|
Form
of Proxy of First Alachua Banking
Corporation |