1993 Form 10-K
Securities and Exchange Commission
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
I934
For the Fiscal Year Ended December 31, 1993
Commission File Number 0-13358
CAPITAL CITY BANK GROUP, INC.
Incorporated in the State of Florida in 1982
I.R.S. Employer Identification Number 59-2273542
Address: 217 North Monroe St., Tallahassee, FL 32301
Telephone: (904) 224-1171
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock - $.01 par value
As of March 1, 1994, Capital City Bank Group, Inc. had 3,105,243 shares of
common stock issued and 2,849,316 shares outstanding.
Capital City Bank Group, Inc. (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
There is no established trading market for the common stock of Capital City Bank
Group, Inc. The aggregate market value (based on last sale of which the Company
has knowledge) of Capital City Bank Group, Inc. common stock held by
nonaffiliates on March 1, 1994, was approximately $32,090,656.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report to shareholders for the fiscal year
ended December 31, 1993 are incorporated by reference into Parts I, II, and IV.
Portions of the Registrant's definitive proxy statement (pursuant to Regulation
14A), to be filed not more than 120 days after the end of the fiscal year
covered by this report, are incorporated by reference into Part III.
<PAGE>
CAPITAL CITY BANK GROUP, INC.
ANNUAL REPORT FOR 1993 ON FORM 10-K
TABLE OF CONTENTS
PART I PAGE
Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters To a Vote of Security Holders 12
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 12
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8. Financial Statements and Supplementary Data 40
Item 9. Changes in and Disagreement with Accountants on Accounting
and Financial Disclosure 60
PART III
Item 10. Directors and Executive Officers of the Registrant 60
Item 11. Executive Compensation 62
Item 12. Security Ownership of Certain Beneficial Owners and
Management 62
Item 13. Certain Relationships and Related Transactions 62
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 62
<PAGE>
PART I
Item I. Business
Capital City Bank Group, Inc., ("CCBG" or "Company"), is a multi-bank holding
company registered under the Bank Holding Company Act of 1956, as amended. It
was organized under the laws of the State of Florida on December 13, 1982, to
acquire five national banks and one state bank pursuant to a Reorganization
Agreement and Plan of Merger dated May 16, 1983.
At year-end 1993, CCBG owned ten banks with a total of thirty offices in seven
counties. In March of 1993, Capital City Bank Group, Inc. expanded its market
by acquiring three offices in Citrus County. The offices are located in
Meadowcrest, Citrus Springs and Floral City. The new offices are being operated
as branches of Capital City First National Bank and had total deposits of $37.0
million on the date of acquisition. Expansion into Citrus County added the
seventh county to CCBG's market area and, with this addition, the Company now
has a presence in four counties in North-Central Florida and three counties in
North Florida. In February of 1994, the Company acquired a bank facility (real
estate only) which will be opened during the summer as a fourth location in
Citrus County.
Banks within the Capital City Bank Group serve North Florida and South Georgia
markets and, collectively, are referred to as the "Group" banks. A listing of
the banks is presented below.
<PAGE>
<TABLE>
<CAPTION>
Five Year
Date Date Acquired Deposits as of Compound Growth Rate
Name Chartered by CCBG December 31, 1993 (Deposits)
<S> <C> <C> <C> <C>
First National Bank March 19, 1895 January 1, 1984 $300,193,729 7.7%
Tallahassee, Florida
City National Bank November 30, 1974 January 1, 1984 69,737,309 5.1%
Tallahassee, Florida
Levy County State Bank September 18, 1948 January 1, 1985 67,616,574 0.0%
Chiefland, Florida
Second National Bank March 23, 1967 January 1, 1984 51,483,167 7.9%
Tallahassee, Florida
Industrial National Bank December 4, 1968* January 1, 1984 51,477,014 (1.2%)
Tallahassee, Florida
Gadsden National Bank June 1, 1987** June 1, 1987 35,257,932 (1.8%)
Quincy, Florida
Farmers & Merchants October 18, 1911 February 1, 1986 29,388,781 4.5%
Bank of Trenton
Trenton, Florida
Branford State Bank March 13, 1911 July 31, 1989 27,191,629 12.7%
Branford, Florida
Havana State Bank May 30, 1907 January 1, 1984 26,322,684 1.7%
Havana, Florida
First National Bank of December 18, 1978 January 1, 1984 19,806,682 6.4%
Jefferson County
Monticello, Florida
<F1>
*Originally chartered as Industrial Bank of Tallahassee on March 12, 1940.
<F2>
**DeNovo
</TABLE>
<PAGE>
Capital City First National Bank of Tallahassee ("First National Bank") is the
largest bank within the Company representing $352.4 million, or 46.2%, of
consolidated assets totalling $762.3 million at December 31, 1993. First
National earned $4.0 million, or 48.5%, of the consolidated net income of $8.2
million. See page 61 for Net Income and Balance Sheet Information on the Group
banks.
Capital City Bank Group, Inc., and four of the Group banks are located in
Tallahassee, the state capital. State government and two major state
universities employ a large percentage of the local work force and help to
provide a strong and stable economy for Tallahassee and the surrounding area.
During 1994, the Company will be engaged in a major organizational restructuring
which will result in the consolidation of the Company's seven North Florida
banks. This restructuring will allow the Company to present a consistent image
to a broader market and to better serve our clients through the use of a common
name with multiple, convenient locations. Management anticipates that the
restructuring will be completed during 1995.
Dividends and management fees received from the Group banks are the Company's
only source of income. Dividend payments by the Group banks to the parent
company depend on their capitalization, earnings and projected growth, and are
limited by various regulatory restrictions. See the section entitled
"Regulation and Supervision" and Note 14 of the Notes to Financial Statements
for additional information.
The Company had a total of 476 (full-time equivalent) employees at March 1,
1994. In management's opinion, the Company enjoys a satisfactory relationship
with its employees. Pages 12-40 contain other financial and statistical
information about the Company.
Banking Services
The Group banks are engaged in the commercial and retail banking business,
including accepting demand, savings and time deposits, extending credit,
providing data processing services, trust services and a broad range of other
financial services to corporate and individual customers, governmental bodies
and correspondent banks. As of March 1, 1994, First National Bank provided
correspondent services to 32 financial institutions (including the Group banks
listed previously) located throughout North Florida and South Georgia. First
National's data processing center provides computer services to 20 of the 32
financial institutions.
The Group banks are members of the "Honor" system which enables customers to
utilize their "Buck" cards to access cash at automatic teller machines ("ATMs")
located throughout the state of Florida. Additionally, customers may access
their cash outside the state of Florida through various ATM networks which are
connected through the Southeast Switch.
Trust Services
The Trust Department of First National Bank provides fiduciary services to
clients in the following ways: as trustee of living trusts and trusts under
will; as personal representative to administer estate settlement; as guardian of
the property in Court guardianship appointments; as investment manager and
custodian of assets in agency accounts; and as trustee or custodian for assets
<PAGE>
in pension and profit sharing plans. The current market value of trust assets
totalled $336.9 million at December 31, 1993, of which $90.7 million represented
assets under management.
Competition
The banking business in Florida is rapidly changing and Capital City Bank Group,
Inc., operates in a highly competitive environment, especially with respect to
services and pricing. The Company competes against a wide range of financial
institutions including commercial banks, savings and loan associations, credit
unions and various other investment and finance companies.
Capital City Bank Group, Inc.'s, primary market areas are in North Florida and
consists of Leon, Gadsden, Jefferson, Levy, Gilchrist, Suwannee and Citrus
counties. The Group banks compete against local banking concerns, subsidiaries
of statewide bank holding companies and multi-bank holding companies
headquartered outside of Florida which have banking or bank-related operations
established within these markets. All of the state's major banking concerns
have a presence in Leon County. Deposits of the four Group banks located in
Leon County totalled $457.1 million, or 69.0%, of the Company's consolidated
deposits at December 31, 1993.
Based on information developed as of June 30, the following chart depicts the
market share percentage of each Group bank within its respective county. The
percentage for each bank is based on total commercial bank deposits within the
county.
Market Share
as of June 30(1)
1993 1992 1991
First National Bank 14.6% 15.5% 16.6%
City National Bank 4.3% 4.2% 4.8%
Industrial National Bank 3.1% 3.3% 3.5%
Second National Bank 2.8% 2.9% 3.1%
Total Leon County 24.8% 25.9% 28.0%
Gadsden National Bank 18.8% 19.0% 19.7%
Havana State Bank 13.4% 12.9% 13.1%
Total Gadsden County 32.2% 31.9% 32.8%
Levy County State Bank 34.8% 35.7% 37.2%
Farmers & Merchants Bank of Trenton 56.0% 58.8% 60.3%
First National Bank of Jefferson County 28.0% 27.4% 27.5%
Branford State Bank 15.9% 11.7% 11.0%
First National Bank -- Citrus County 4.1% -- --
(1) Obtained from the June 30, Office Level Report published by the Florida
Bankers Association for each year.
Following is a table which sets forth the number of commercial banks and
offices, including the Company and its competitors, within each of the
respective counties as of June 30, 1993.
<PAGE>
Number of Number of Commercial
County Commercial Banks Bank Offices
Citrus 8 26
Gadsden 5 10
Gilchrist 2 4
Jefferson 2 2
Leon 13 51
Levy 4 12
Supervision and Regulation
Numerous federal and state laws and regulations govern the organization and
operations of bank holding companies and their banking subsidiaries. Capital
City Bank Group, Inc., as a bank holding company, is subject to regulation,
supervision and examination by the Board of Governors of the Federal Reserve
System (the "Board" ) under the Bank Holding Company Act of 1956 (the "BHC
Act"), as amended.
Under the BHC Act, the activities of bank holding companies are limited to
business so closely related to banking, managing or controlling banks as to be
properly incident thereto. The BHC Act generally prohibits a bank holding
company from merging or consolidating with, or acquiring more than a specified
percentage of the voting shares or assets of another bank holding company or any
commercial bank without the prior approval of the Board. Similar prior approval
requirements exist for certain changes in the ownership of the voting securities
of a bank holding company. The BHC Act prohibits the acquisition by a bank
holding company of the voting shares of any commercial bank in another state,
unless such acquisition is specifically authorized by the laws of such other
state. Under current Florida law, banks and/or bank holding companies located
only in certain states may purchase banks and/or bank holding companies within
Florida, provided their state of location has reciprocal legislation allowing
Florida banks and/or bank holding companies to do the same within that state.
Such states are Alabama, Arkansas, Georgia, Louisiana, Maryland, Mississippi,
North Carolina, South Carolina, Tennessee, Virginia, West Virginia and the
District of Columbia.
Legislation has recently been introduced in Florida which would change Florida
law to permit banks located in states, other than those set forth above, to
acquire Florida banks or bank holding companies. The Company is unable to
predict the likelihood of passage of this legislation.
The Federal Reserve Act imposes various limitations on the extent to which the
Company's subsidiary banks can finance or otherwise supply funds to Capital City
Bank Group, Inc., or its subsidiaries. In general, these restrictions require
that any such extensions of credit must be on terms and conditions consistent
with safe and sound banking practices, and be secured by designated amounts of
specified collateral. The lending bank may loan up to 10% of its capital stock
and surplus to any one affiliate, but may not lend, in the aggregate, more than
20% of its capital stock and surplus to all such affiliates. Additionally,
approval of the appropriate regulatory authority is required if the total
dividends declared by a national or state bank exceed certain legal limits. See
Note 14 in the Notes to Financial Statements for further information.
<PAGE>
In addition to the Federal Reserve, the Company's six national bank subsidiaries
are subject to regulation, supervision and examination by the Comptroller of the
Currency and the Federal Deposit Insurance Corporation ("FDIC"). The Company's
four state bank subsidiaries, all chartered under Florida law, are subject to
similar regulation by the Comptroller of the State of Florida and the FDIC.
The passage and periodic phasing in of various congressional acts has
significantly affected Capital City Bank Group, Inc., and the Group banks, and
the competitive environment in which they operate. The Depository Institutions
Deregulation and Monetary Control Act of 1980, for example, (i) changed the
structure and rates of reserves which member banks must maintain with the
Federal Reserve; (ii) required the Federal Reserve System to charge member banks
for services provided; (iii) phased out, over a maximum six-year period,
regulatory ceilings on deposit rates of interest; (iv) permanently authorized
interest bearing transactional accounts; (v) expanded the lending, investment
and deposit taking powers of thrift institutions; (vi) increased Federal Deposit
Insurance coverage from $40,000 to $100,000 per account and (vii) preempted
certain state usury laws. Interest rate ceilings on savings and N.O.W.
accounts, which were the last of the interest rate ceilings to be phased out,
were eliminated effective March 31, 1986. Of similar significance to the
Company's operations, the Garn-St. Germain Act (Depository Institutions Act of
1982) authorized the offering of money market deposit accounts by commercial
banks and repealed laws stipulating rate differentials on deposit instruments
between commercial banks and thrifts.
More recently, Congress passed the Competitive Equality Banking Act in 1987.
This legislation placed a moratorium on the ability of commercial banks to offer
new products and services relating primarily to insurance, securities and real
estate. The moratorium expired during 1988, but as yet there has been no
congressional action taken to expand the powers of the banking industry.
In January 1989, the Federal banking regulatory authorities issued final
guidelines for implementing risk-based capital requirements which became
effective on March 5, 1989. Currently, there are two basic measures of capital
adequacy: a risk-based measure and a leverage measure. All applicable capital
standards must be satisfied for an institution to be considered in compliance.
An institution which fails to meet minimum capital requirements may be subject
to a capital directive which is enforceable in the same manner and to the same
extent as a final cease and desist order and must submit a capital plan within
60 days to the FDIC. If the leverage ratio falls to 2% or less, the bank may be
deemed to be operating in an unsafe or unsound condition, allowing the FDIC to
take various enforcement actions, including possible termination of insurance or
placing the institution into receivership.
Bank regulators continue to indicate their desire to raise capital requirements
applicable to the banking industry beyond current levels. However, the Company
is unable to predict whether or when higher capital requirements would be
imposed.
Under the new risk-based capital and leverage ratio guidelines, the Company's
regulatory capital level exceeds the minimum requirements. See the information
set forth under the heading "Liquidity and Capital Resources" in the section of
this report entitled "Financial Review".
In August 1989, the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA") was enacted. FIRREA contains major regulatory reforms,
stronger capital standards for savings and loans and stronger civil and criminal
<PAGE>
enforcement provisions applicable to all financial institutions. FIRREA allows
the acquisition of healthy and failed savings and loans by bank holding
companies, and removes all interstate barriers on such bank holding company
acquisitions. With certain qualifications, FIRREA also allows bank holding
companies to merge acquired savings and loans into their existing commercial
bank subsidiaries.
Federal Reserve policy requires a bank holding company to act as a source of
financial strength and to take measures to preserve and protect bank
subsidiaries in situations where additional investments in a troubled bank may
not otherwise be warranted. Under FIRREA, if a Bank holding company has more
than one bank or thrift subsidiary, such as the Company, each of the bank
holding company's subsidiary depository institutions are responsible for any
losses to the FDIC as a result of an affiliated depository institution's
failure. As a result, a bank holding company may be required to loan money to
its subsidiaries in the form of capital notes or other instruments which qualify
as capital under regulatory rules. Any loans from the holding company to such
subsidiary banks would likely be unsecured and subordinated to such bank's
depositors, and perhaps to other creditors of the bank.
The FRB, the OCC and the FDIC collectively have extensive enforcement authority
over depository institutions and their holding companies, and this authority has
been enhanced substantially by FIRREA. This enforcement authority includes,
among other things, the ability to assess civil money penalties, to issue cease
and desist or removal orders, to initiate injunctive actions, and, in extreme
cases, to terminate deposit insurance. In general, these enforcement actions
may be initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the federal banking
agencies. FIRREA significantly increased the amount of and grounds for civil
money penalties and generally requires public disclosure of final enforcement
actions.
In 1992, the Federal Deposit Insurance Corporation Improvement Act ("FDICIA")
was enacted. Certain aspects of FDICIA have increased and are expected to
continue to increase the Company's cost of doing business. Some of the more
significant provisions of FDICIA are outlined below:
BIF Recapitalization - The deposits of the Company's subsidiary banks are
insured by the FDIC through the Bank Insurance Fund ("BIF"). The FDIC is
authorized to charge assessments for deposit insurance, and, as mandated by
FDICIA, the FDIC has adopted regulations effective January 1, 1993 for the
transition from a flat-ratio insurance assessment system to a risk-based system
by January 1, 1994. The risk assessment approach bases a banking institution's
insurance assessment on three factors: the probability that the applicable
insurance fund will incur a loss from the institution; the likely amount of the
loss; and the revenue needs of the insurance fund. To arrive at a risk
assessment for an institution, the FDIC will place it in one of nine risk
categories using a two-step process based first on capital ratios and then on
other relevant information. The FDIC will then assign an institution to one of
three capital groups "well-capitalized", "adequately capitalized", or
"undercapitalized". The institution is then placed into one of three risk
subgroups, based on reviews by the institution's primary federal or state
regulatory agency, statistical analyses of financial statements and other
relevant information.
Pursuant to these regulations, a financial institution's deposit insurance
assessment will be within a range of 0.23 percent to 0.31 percent of its
<PAGE>
qualifying deposits, depending on the institutions risk classification. Based
on notices from the regulators in late 1993, in the first half of 1994 the
Company's banking subsidiaries will pay an assessment of 23 cents per each $100
of deposits, the lowest amount payable by an insured depository institution.
This is the amount paid by the Group banks in 1992 and 1993. FDICIA requires
the FDIC to restore the Bank Insurance Fund to 1.25% of total insured deposits
within 15 years and does not impose a cap on the level of deposit insurance
assessments.
Supervisory Reforms - FDICIA requires the federal banking agencies and the FDIC,
as insurer, to take prompt action to resolve problems within unhealthy banking
institutions. All depository institutions are classified into one of five
categories ranging from well-capitalized to critically undercapitalized. As an
institution's capital level declines it becomes subject to increasing regulatory
scrutiny and tighter restrictions on operations, management and capital
distributions. Based on the current regulatory capital position of each of the
Group banks, the Company does not anticipate any adverse consequences from these
provisions.
FDICIA further requires an increase in the frequency of "full-scope, on-site"
examinations and expands the current audit requirements. In addition, federal
banking agencies are mandated to review and prescribe uniform accounting
standards that are at least as stringent as Generally Accepted Accounting
Principles.
Deposit Institution Conversions - FDICIA permits the merger or acquisition of
any depository institution with any other, provided that the transaction is
approved by the resulting entity's appropriate federal banking agency. This
would permit, generally for the first time, direct mergers between bank and
thrift institutions.
Operational Standards - Not later than August 1, 1993, the federal bank
regulatory agencies are required to prescribe minimum standards with respect to
various areas of operations, including internal controls, loan documentation,
credit underwriting, asset quality, earnings and compensation arrangements.
Institutions failing to meet the operational standards will be required to
submit corrective plans and will be subject to sanctions for failure to submit
or comply with a plan.
Regulations which will establish these standards are in varying stages of
finalization. Two of the more important areas of regulation stemming from
FDICIA are described below.
Pursuant to FDICIA, the Office of Comptroller of the Currency and other federal
banking agencies adopted real estate lending guidelines which would set loan-to-
value ("LTV") ratios for different types of real estate loans. A LTV ratio is
generally defined as the total loan amount divided by the appraised value of the
property at the time the loan is originated. If the institution does not hold a
first lien position, the total loan amount would be combined with the amount of
all senior liens when calculating the ratio. These guidelines became effective
on March 19, 1993. In addition to establishing the LTY ratios, the guidelines
require all real estate loans to be based upon proper loan documentation and a
recent appraisal of the property.
FDICIA also implemented the Truth in Savings ACT ("TSA"). The FRB adopted
regulations ("Regulation DD") under the TSA that were effective on June 21,
1993. The purpose of the TSA is to require the clear and uniform disclosure of
the rates of interest which are payable on deposit accounts by depository
<PAGE>
institutions and the fees that are assessable against deposit accounts, so that
consumers can make a meaningful comparison between the competing claims of banks
with regard to deposit accounts and products. In addition to disclosures to be
provided when a customer establishes a deposit account, TSA requires the
depository institution to include, in a clear and conspicuous manner, the
following information with each periodic statement of a deposit account: (1)
the annual percentage yield earned, (2) the amount of interest earned, (3) the
amount of any fees and charges imposed, and (4) the number of days in the
reporting period. TSA allows for civil lawsuits to be initiated by customers if
the depository institution violates any provision or regulation under TSA.
Another regulation to which the Company and its banking subsidiaries are subject
is the Community Reinvestment Act of l977 ("CRA"). This requires each federal
banking agency, including the OCC, to use its authority when examining financial
institutions to encourage institutions to meet the credit needs of their local
communities, consistent with safe and sound operations. As part of the
examination of a national bank, the OCC assesses the bank's performance under
the CRA and assigns one of four ratings to the bank, reflecting the bank's
record of meeting community credit needs. A financial institution's CRA rating
is taken into account by the appropriate agency in evaluating certain
applications by the institution, including applications to merge with or acquire
another institution and applications to establish branch offices. In addition,
members of the general public may oppose a transaction requiring regulatory
approval on the ground that the applicant has an inadequate record of meeting
community credit needs.
In a more indirect manner than the regulations previously discussed, the
monetary and fiscal policies of regulatory authorities, including the Federal
Reserve System, also affect the banking industry. Through changes in the
reserve requirements against bank deposits, open market operations in U.S.
Government securities and changes in the discount rate on bank borrowings, the
Board of Governors of the Federal Reserve System influences the cost and
availability of funds obtained for lending and investing.
Because of concerns relating to the competitiveness and the safety and soundness
of the industry, the Congress is considering, even after the enactment of FIRREA
and FDICIA, a number of wide-ranging proposals for altering the structure,
regulation and competitive relationships of the nation's financial institutions.
Among such bills are proposals to prohibit banks and bank holding companies from
conducting certain types of activities, to subject banks to increased disclosure
and reporting requirements, to eliminate the present restriction on interstate
branching by banks, to alter the statutory separation of commercial and
investment banking and to further expand the powers of banks, bank holding
companies and competitors of banks. It cannot be predicted whether or in what
form any of these proposals will be adopted or the extent to which the business
of Capital City Bank Group, Inc. may be affected thereby.
Item 2. Properties
Capital City Bank Group, Inc., is headquartered in Tallahassee, Florida. The
Company's offices are in the First National Bank building located on the corner
of Tennessee and Monroe Streets in downtown Tallahassee. The building is owned
by First National Bank but is located, in part, on land leased under a long-term
agreement.
City National's main office is located on land leased from the Smith Interest
General Partnership in which several directors and officers have an interest.
Lease payments during 1993 totalled approximately $51,900.
<PAGE>
As of March 1, 1994, the Company had 30 banking locations. Of the 30 locations,
the Company leases either the land or buildings (or both) at 8 locations and
owns the land and buildings at the remaining 22.
Item 3. Legal Proceedings
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
PART II
Item 5. Market for the Registrant's Securities and Related Stockholder Matters
There is currently no established trading market for the common stock of
Capital City Bank Group, Inc., and therefore, no bid or sale quotations are
generally available. Based on sales of stock of which the Company has knowledge,
the stock has traded in a range of $24.00 to $26.00 per share for the two-year
period ended December 31, 1993, with the most recent trades at $26.00 per share.
Item 6. Selected Financial And Other Data
For the Years Ended December 31,
1993 1992 1991 1990 1989
(Dollars in Thousands, Except Per Share Data)
Interest Income $ 46,395 $48,306 $54,801 $58,527 $58,913
Net Interest Income 31,555 29,775 28,195 27,851 27,444
Provision for Loan Losses 960 1,216 1,817 3,342 2,447
Income Before Accounting
Change 8,728 8,376 7,272 6,590 7,234
Net Income 8,244 8,376 7,272 6,590 7,234
Per Common Share:
Income Before
Accounting Changes $ 2.99 $ 2.86 $ 2.46 $ 2.16 $ 2.33
Net Income 2.82 2.86 2.46 2.16 2.33
Cash Dividends Declared .83 .78 .73 .69 .65
Book Value 23.56 21.59 19.55 17.89 16.76
Based on Net Income:
Return on Average Assets
Before Accounting Change 1.21% 1.27% 1.15% 1.05% 1.18%
Return on Average Assets 1.14 1.27 1.15 1.05 1.18
Return on Average Equity
Before Accounting Change 13.15 13.71 13.07 12.25 14.48
Return on Average Equity 12.43 13.71 13.07 12.25 14.48
Dividend Payout Ratio 29.44 27.25 29.65 31.50 27.72
Averages for the Year:
Loans, Net of Unearned
Interest $381,807 $358,876 $368,555 $378,405 $379,939
Earning Assets 651,042 598,127 571,165 561,741 550,638
Assets 722,286 662,150 633,963 624,732 614,335
Deposits 630,324 573,162 546,291 537,774 527,524
Long-Term Debt 1,381 3,156 5,555 5,703 7,368
Shareholders' Equity 66,328 61,078 55,635 53,791 49,949
<PAGE>
Year-End Balances:
Loans, Net of Unearned
Interest $399,424 $369,911 $364,773 $380,127 $380,828
Earning Assets 675,273 619,929 568,720 555,237 556,782
Assets 762,335 686,966 639,540 643,968 626,047
Deposits 662,745 597,497 555,092 550,336 536,950
Long-Term Debt 1,900 2,000 4,000 6,225 6,000
Shareholders' Equity 67,140 63,169 57,723 53,444 51,956
Equity to Assets Ratio 8.81% 9.20% 9.03% 8.30% 8.30%
Other Data:
Average Shares
Outstanding 2,924,022 2,932,123 2,958,920 3,049,992 3,103,535
Shareholders of Record* 754 748 731 727 734
Banking Locations* 30 27 27 26 26
Full-Time Equivalent
Employees* 476 466 469 489 478
*As of March 1st of the following year.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Review
This section provides supplemental information which should be read in
conjunction with the consolidated financial statements and related notes. The
Financial Review is divided into three subsections entitled Earnings Analysis,
Financial Condition, and Liquidity and Capital Resources. Information therein
should facilitate a better understanding of the major factors and trends which
affect the Company's earnings performance and financial condition, and how the
Company's performance during 1993 compares with prior years. Throughout this
section, Capital City Bank Group, Inc., and its subsidiaries, collectively, are
referred to as "CCBG" or the "Company". The year-to-date averages used in this
report are based on daily balances for each respective year. In certain
circumstances comparing average balances for the fourth quarter of consecutive
years may be more meaningful than simply analyzing year-to-date averages.
Therefore, where appropriate, fourth quarter averages have been presented for
analysis and have been clearly noted as such.
Earnings Analysis
In 1993, the Company's earnings were $8.7 million, or $2.99 per share, before
accounting for the adoption of Statement of Financial Accounting Standards No.
109 ("Accounting for Income Taxes"), which resulted in a one-time, non-cash
charge of $484,000, or $.17 per share. This compares with earnings of $8.4
million, or $2.86 per share in 1992, and $7.3 million, or $2.46 per share in
1991. On a per share basis, before the effect of the accounting change, earnings
increased 4.5% in 1993 versus an increase of 16.3% in 1992. Factors, other than
the accounting change, which had a significant impact on the Company's earnings
in 1993, as compared to 1992, include:
* Higher average earning assets resulted in an increase in net interest
income of $1.8 million, or 6.0%.
* Improving asset quality and a low level of net charge-offs enabled the
Company to reduce the provision for loan losses by $256,000, or 21.0%.
<PAGE>
* Higher volume in mortgage originations and gains on the sale of other
real estate served to boost noninterest income $536,000, or 4.7%.
* The Company's expansion into Citrus County, adding three new locations,
contributed to an increase in noninterest expense of $2.1 million, or
7.3%.
These and other 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)
For the Years Ended December 31,
1993 1992 1991
Interest and Dividend Income $46,395 $48,306 $54,801
Taxable-Equivalent Adjustments 1,663 1,583 1,567
48,058 49,889 56,368
Interest Expense 14,840 18,531 26,606
Net Interest Income 33,218 31,358 29,762
Provision for Loan Losses 960 1,216 1,817
Taxable-Equivalent Adjustments 1,663 1,583 1,567
Noninterest Income 12,014 11,478 10,814
Noninterest Expense 30,572 28,497 27,440
Income Before Income Taxes 12,037 11,540 9,752
Income Taxes 3,309 3,164 2,480
Income Before Accounting
Change 8,728 8,376 7,272
Cumulative Effect of
Accounting Change (484) -- --
Net Income $ 8,244 $8,376 $7,272
Income Per Share Before
Accounting Change $ 2.99 $ 2.86 $ 2.46
Net Income Per Share $ 2.82 $ 2.86 $ 2.46
Net Interest Income
Net interest income represents the Company'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 the
Company'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.
<PAGE>
<TABLE>
Table 2
AVERAGE BALANCES AND INTEREST RATES
(Taxable-Equivalent Basis - Dollars in Thousands)
<CAPTION>
1993 1992 1991
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans, Net Unearned
Interest (1)(2) $381,807 $ 33,579 8.79% $358,876 $34,898 9.72% $368,555 $40,813 11.07%
Taxable Investment
Securities 139,875 7,395 5.36% 115,368 7,393 6.51% 76,611 6,045 8.00%
Tax-Exempt Investment
Securities (2) 65,256 5,130 7.86% 51,794 4,870 9.40% 48,677 4,971 10.21%
Funds Sold 64,104 1,954 3.05% 72,089 2,728 3.79% 77,322 4,539 5.87%
Total Earning Assets 651,042 48,058 7.40% 598,127 49,889 8.36% 571,165 56,368 9.88%
Cash & Due From Banks 45,536 40,346 39,138
Allowance Loan Losses (7,641) (7,877) (8,015)
Other Assets 33,349 31,554 31,675
TOTAL ASSETS $722,286 $662,150 $633,963
Liabilities:
NOW Accounts $ 78,119 $ 1,617 2.09% $ 67,155 $1,770 2.64% $ 62,085 $ 2,786 4.49%
Money Market Accounts 80,036 l,779 2.24% 74,082 2,316 3.13% 76,990 3,886 5.05%
Savings Accounts 113,850 2,953 2.59% 92,053 3,652 3.97% 43,666 2,220 5.08%
Other Time Deposits 208,729 7,864 3.77% 211,354 10,047 4.75% 245,975 16,225 6.60%
Total Interest
Bearing Deposits 480,734 14,213 2.96% 444,644 17,785 4.00% 428,716 25,117 5.86%
Funds Purchased 17,765 548 3.08% 18,163 535 2.95% 19,017 997 5.24%
Other Borrowed Funds 1,069 23 2.18% 1,072 32 3.02% 1,483 47 3.14%
Long-Term Debt 1,381 56 4.06% 3,156 179 5.66% 5,555 445 8.02%
Total Interest
Bearing Liabilities 500,949 14,840 2.97% 467,035 18,531 3.97% 454,771 26,606 5.85%
Noninterest Bearing
Deposits 149,590 128,518 117,575
Other Liabilities 5,419 5,519 5,982
TOTAL LIABILITIES 655,958 601,072 578,328
<PAGE>
Shareholders' Equity:
Common Stock 31 31 31
Surplus 5,857 5,858 5,858
Retained Earnings 60,440 55,189 49,746
TOTAL SHAREHOLDERS'
EQUITY 66,328 61,078 55,635
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $722,286 $662,150 $633,963
Interest Rate Spread 4.43% 4.39% 4.03%
Net Interest Income $33,218 $31,358 $29,762
Net Interest Margin (3) 5.11% 5.26% 5.23%
<F1>
(1) Average balances include nonaccrual loans and interest income includes fees on loans of approximately
$1,610,000, $1,377,000, and $1,348,000 in 1993, 1992 and 1991, respectively.
<F2>
(2) Interest income includes the effects of taxable-equivalent adjustments, using a 34% tax rate to
adjust interest on tax-exempt loans and securities to a taxable-equivalent basis.
<F3>
(3) Net interest income divided by earning assets.
</TABLE>
<TABLE>
Table 3
RATE/VOLUME ANALYSIS(1)
(Dollars in Thousands)
<CAPTION>
1993 Change From 1992 1992 Change From 1991
Due To Due To
Average Average
Total Volume Rate Total Volume Rate
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans, Net of Unearned Interest(2) $(1,319) $2,230 $(3,549) $(5,915) $(1,072) $(4,843)
Investment Securities:
Taxable 2 1,596 (1,594) 1,348 3,101 (1,753)
Tax Exempt (2) 260 1,266 (1,006) (101) 318 (419)
Funds Sold (774) (440) (334) (1,811) (375) (1,436)
Total (1,831) 4,652 (6,483) (6,479) 1,972 (8,451)
Interest Bearing Liabilities:
NOW Accounts (153) 289 (442) (1,016) 228 (1,244)
Money Market Accounts (537) 186 (723) (1,570) (147) (1,423)
Savings Accounts (699) 865 (1,564) 1,432 2,460 1,028
Other Time Deposits (2,183) (125) (2,058) (6,178) (2,284) (3,894)
Funds Purchased 13 (12) 25 (462) (45) (417)
Other Borrowed Funds (9) - (9) (15) (13) (2)
Long-Term Debt (123) (100) (23) (266) (192) (74)
Total (3,691) 1,103 (4,794) (8,075) 7 (8,082)
Change in Net Interest Income $1,860 $3,549 $(1,689) $1,596 $1,965 $ 369
<F1>
(1) This table shows the change in net interest income for the 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.
<F2>
(2) Interest income includes the effects of taxable-equivalent adjustments using a 34% tax rate to
adjust interest on tax-exempt loans and securities to a taxable-equivalent basis.
</TABLE>
<PAGE>
In 1993, taxable-equivalent net interest income increased $1.9 million, or 5.9%.
This follows an increase of $1.6 million, or 5.4%, in 1992 and $249,000, or .8%,
in 1991. During the period 1991 through 1993, higher levels of earning assets
and a more favorable mix of funding sources have served to increase the
Company's taxable-equivalent net interest income.
Interest rates, in general, have trended downward in recent years. Since the
first quarter of 1991, the prime rate has declined from 10.0% to 6.0% and the
Federal Reserve Bank's discount rate has fallen from 6.5% to 3.0%. In 1993 both
rates were stable at 6.0% and 3.0%, respectively.
The Company's taxable-equivalent yield on average earning assets decreased 96
basis points in 1993 from 8.36% to 7.40%, and 152 basis points in 1992 from
9.88% to 8.36%. The lower yields are reflective of declining interest rates and
sluggish loan volume. As the Company's interest sensitive assets mature and/or
reprice, the lower rates adversely impact the portfolio yields. Additionally,
the loan portfolio, which is the largest and highest yielding component of
earning assets, has declined from 64.5% of earning assets in 1991 to 58.6% in
1993, reflecting a weakened economy. However, management is encouraged by some
improvement in loan volume during the latter part of 1993.
The average rate paid on interest bearing liabilities in 1993 was 2.97% versus
3.97% in 1992 and 5.85% in 1991. Lower interest rates and a more favorable
deposit mix were the primary factors contributing to the reduction in the
average rate. Noninterest bearing deposits increased from 21.5% of the
Company's average deposits in 1991 to 23.7% in 1993, while other time deposits
(i.e., certificates of deposit) decreased from 45.0% to 33.1%, over the same
period.
The Company's interest rate spread (defined as the taxable-equivalent yield on
average earning assets less the average rate paid on interest bearing
liabilities) increased 4 basis points in 1993 and 36 basis points in 1992.
Improvement in the interest rate spread reflects declining interest rates and a
more rapid repricing of interest sensitive liabilities versus earning assets.
The Company's net interest margin (defined as taxable-equivalent interest income
less interest expense divided by average earning assets) fell to 5.11% in 1993,
from 5.26% in 1992 and 5.23% in 1991. These relatively strong margins will be
difficult to maintain, particularly in light of the continuing pressure on the
pricing and/or repricing of assets. Continued strengthening in the economy and
opportunities to profitably employ investable funds in the loan portfolio
without compromising credit quality, will be key to management's ability to
maintain strong margins in 1994.
A further discussion of the Company'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 $960,000 in 1993 versus $1.2 million in 1992
and $1.8 million in 1991. The decrease over this period is attributable to a
reduction in net charge-offs and a reserve which management considers to be
adequate based on the current level of nonperforming loans and the potential for
loss inherent in the portfolio at year-end.
<PAGE>
The provision in 1993 enabled the Company to cover net charges to the allowance
for loan losses and to maintain the level of the allowance at 1.9% of
outstanding loans. See the section entitled "Financial Condition" for further
discussion regarding the allowance for loan losses. Selected loss coverage
ratios are presented below:
1993 1992 1991
Provision for Loan Losses as a
Multiple of Net Charge-offs 1.0x 0.9x 1.1x
Pre-tax Income Plus Provision
for Loan Losses as Multiple
of Net Charge-offs 13.7x 9.8x 6.9x
Noninterest Income
Noninterest income increased $536,000, or 4.7%, in 1993 compared with $665,000,
or 6.1%, in 1992. Factors affecting noninterest income are discussed below.
Trust fees increased $60,000, or 10.3%, in 1993, due to growth in assets under
management. Trust assets totalled $336.9 million at December 31, 1993. Assets
under management grew $18.3 million, or 25.3%, in 1993, to a total of $90.7
million. Trust fees increased $98,000, or 20.3%, in 1992, reflecting growth of
$12.6 million, or 21.1%, in assets under management and repricing of certain
services.
Service charges on deposit accounts decreased $51,000, or 0.9%, in 1993,
compared to an increase of $111,000, or 2.0%, in 1992. Service charge revenues
in any one year are dependent on the number of accounts, primarily transaction
accounts, and the level of activity subject to service charges.
Data processing revenues were down $66,000, or 2.7%, in 1993 versus an increase
of $213,000, or 9.5%, in 1992. The data processing center provides computer
services to both financial and non-financial clients in North Florida and South
Georgia. For the year ended December 31, 1993, services provided to non-
financial clients represented 50% of total revenues, which was down slightly
from 52.2% in 1992. The decrease in 1993 is primarily attributable to repricing
of certain servicing agreements. The increase in 1992 is attributable to the
growth in services provided to non-financial entities.
Net securities gains recognized during 1993 totalled $28,000, versus a loss of
$2,000 in 1992. The net gain in 1993 consisted of gross gains of $69,000 and
losses of $41,000. All gains and losses recognized in 1993 were related to the
redemption of principal from mortgage-backed securities and bonds which were
called during the year. See Notes 1 and 5 in the Notes to Financial Statements
for additional information on the Company's investment portfolio and recognition
of gains and losses.
Other noninterest income increased $562,000, or 20.1%, in 1993 versus $250,000,
or 9.8% in 1992. The Company originates residential mortgage loans to sell in
the secondary market. Significant increases in origination volume generated fee
increases of $477,000, or 93.8%, and $315,000, or 159.2%, in 1993 and 1992,
respectively. Gains on the sale of other real estate totalled $225,000 and was
up slightly over the prior year.
Noninterest income as a percent of average earning assets represented 1.85% in
1993 compared to 1.92% in 1992 and 1.89% in 1991.
Noninterest Expense
Total noninterest expense for 1993 was $30.6 million, an increase of $2.1
million, or 7.3%, over 1992. This followed an increase of $1.1 million, or
3.9%, in 1992. The most significant factor impacting the Company's noninterest
expense during 1993 was expansion into Citrus County through the acquisition of
branch offices. The acquisition was consummated on March 15, adding three new
office locations and increasing deposits by $37.0 million.
The Company's compensation expense totalled $16.2 million, an increase of $1.6
million, or 11.4%, over 1992. There were several factors which impacted the
Company's compensation expense, including addition of the three Citrus County
offices which added 13 new employees, higher pension expense and implementation
of the Company's stock incentive plan. Management has revised the interest rate
assumptions incorporated in the pension plan to reflect the lower interest rate
environment. Lower rates reduced projected earnings on the plan assets and
increased current funding requirements, both of which result in higher pension
expense. Management anticipates rate assumptions will require revision again in
1994. Nineteen ninety-three was the first year the Company incurred stock
compensation expense as plan participants became eligible to earn shares under
the Company's 1992 Stock Incentive Plan. The 1993 expense reflects the cost of
shares earned in 1993, plus an allocation of expense for shares eligible for
issuance if specified long-term goals are achieved in future years. The
Company's compensation expense totalled $14.5 million in 1992, an increase of
$485,000, or 3.5%, over 1991. The increase in 1992 is attributable to normal
raises and higher pension expense.
Occupancy expense (including furniture, fixtures & equipment) was up by $207,000
(4.2%) and $200,000 (4.3%) in 1993 and 1992, respectively. These increases are
primarily attributable to an increase in the number of operating facilities and
maintenance of existing locations.
Other noninterest expense increased $215,000, or 2.4%, in 1993, compared to an
increase of $372,000, or 4.3%, in 1992. The increase in 1993 is primarily
attributable to expenses associated with the opening of the three new offices.
Offsetting a significant portion of the increase due to expansion was a
reduction of $497,000 in the costs associated with other real estate, including
write-downs and related expenses. The increase in 1992 is attributable to
higher costs associated with other real estate holdings, which increased, in
aggregate, $475,000 over 1991.
Net noninterest expense (defined as noninterest income minus noninterest
expense) as a percentage of average earning assets was 2.85% in 1993 compared to
2.85% in 1992 and 2.90% in 1991.
<PAGE>
Income Taxes
The consolidated provision for federal and state income taxes was $3.3 million
in 1993 compared to $3.2 million in 1992 and $2.5 million in 1991. The increases
in the tax provision over the last three years is primarily attributable to the
higher level of taxable income.
The effective tax rate was 27.5% in 1993, 27.4% in 1992 and 25.4% in 1991. These
rates differ from the statutory tax rates due primarily to tax-exempt income.
The increase in the effective tax rate from 1991 to 1992 is attributable to the
decreasing level of tax-exempt income relative to pre-tax income. Tax-exempt
income (net of the adjustment for disallowed interest) as a percent of pre-tax
income was 26.8% in 1993, 26.6% in 1992 and 31.2% in 1991.
<PAGE>
Change in Accounting Principle
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", which changed the method of
accounting to the "liability" method from the "deferred" method previously
required by Accounting Principles Board Opinion No. 11. The cumulative effect
of adopting the new accounting standard was a reduction in the Company's net
income of $484,000, which was recognized in the first quarter. See Note 1 in
the Notes to Financial Statements.
Financial Condition
Average assets increased $60.1 million (9.1%) from $662.2 million in 1992 to
$722.3 million in 1993. Average earning assets increased to $651.0 million in
1993, a $52.9 million, or 8.8% increase over 1992. Slower loan growth in 1991
and 1992 resulted in a decrease in average loans of $9.9 million, or 2.6% in
1991 and $9.7 million, or 2.6% in 1992. In 1993, while still sluggish, loan
volume began to improve and the Citrus County acquisitions added $12.0 million
in loans, resulting in an increase in average loans of $22.9 million, or 6.4%.
In addition to funding loan growth, the majority of the Company's deposit
growth, including $44 million in acquired deposits, was used to fund growth in
the investment portfolio. During 1993, the Company significantly increased its
investment in taxable and tax-exempt securities, extending maturities to take
advantage of more favorable yields. In making the determination as to how
investable funds are to be allocated, management takes into consideration market
yields and the Company's liquidity position.
The Company's average investment portfolio increased $38.0 million, or 22.7%,
during 1993. This followed an increase of $41.9 million, or 33.4%, in 1992. In
1993, average taxable investments increased $24.5 million, or 21.2%, while tax-
exempt investments increased $13.5 million, or 26.0%. Since the enactment of
the Tax Reform Act of 1986, which significantly reduced the tax benefits
associated with tax-exempt investments, management has monitored the level of
tax-exempt investments and, until 1992, has consistently reduced its holdings.
Even with the growth in tax-exempt investments in 1992 and 1993, the tax-exempt
portfolio as a percent of average earning assets has declined from 18.9% in 1986
to 10.0% in 1993. Table 2 on page 15 provides information on average balances
while Table 4 highlights the changing mix of the Company's earning assets over
the last three years.
<PAGE>
<TABLE>
Table 4
SOURCES OF EARNING ASSET GROWTH
(Average Balances - Dollars in Thousands)
<CAPTION>
1992 to Percentage Components
1993 of Total of Total Earnings Assets
Change Change 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Loans:
Commercial, Financial
and Agricultural $ 654 1.2% 6.5% 7.0% 8.7%
Real Estate - Construction (1,707) (3.2) 3.2 3.8 4.6
Real Estate - Mortgage 20,467 38.7 35.5 35.2 36.5
Consumer 3,517 6.7 13.5 14.0 14.7
Total Loans 22,931 43.4 58.7 60.0 64.5
Securities:
Taxable 24,507 46.3 21.5 19.3 13.4
Tax-Exempt 13,462 25.4 10.0 8.7 8.6
Total Securities 37,969 71.7 31.5 28.0 22.0
Funds Sold (7,985) (15.1) 9.8 12.0 13.5
Total Earning Assets $52,915 100.0% 100.0% 100.0% 100.0%
</TABLE>
<PAGE>
Loans
In the last few years new loan volume has been sluggish, though in the last half
of 1993 loan activity began to increase. Loan growth has been impacted by a
number of factors including general economic conditions, particularly in the
real estate market; continued emphasis on credit quality and an effort by the
State of Florida to control growth.
At the local level, consumer spending has been adversely affected by slowing
employment growth by the State in addition to a general slowdown in economic
growth. Florida communities are still adjusting to new land development rules,
which have created dislocations in the real estate markets. Counties which are
served by the Group banks have adopted comprehensive plans, mandated by the
State, which require certain infrastructure to be in place before development
can begin. This effort by the State to control growth is having the effect, at
least in the near-term, of significantly restricting development in certain
markets.
The general deterioration in economic conditions, particularly in the real
estate market, during the period 1990 to 1993, has resulted in refinement of
underwriting standards and a sharper focus on credit quality. Lending is a
major component of the Company's business and is key to profitability. While
management strives to grow the Company's loan portfolio, it can do so only by
adhering to sound banking principles applied in a prudent and consistent manner.
Management is hopeful 1994 will show signs of economic improvement, affording
opportunities to increase loans outstanding and enhance the portfolio's overall
contribution to earnings.
The composition of the Company's loan portfolio at December 31, for each of the
past five years is shown in Table 5. Consistent with bank regulatory reporting
requirements, Bankers' Acceptances purchased (as opposed to originated) and Term
Federal Funds (funds placed with another financial institution generally having
a maturity of less than 90 days) are classified as loans and included in the
commercial loan category. Management views these instruments not as loans but
as investment alternatives in managing short-term liquidity. Bankers'
Acceptances and Term Federal Funds, combined, totalled $6.5 million at December
31, 1993 and $14.7 million at December 31, 1992. Exclusive of Bankers'
Acceptances and Term Federal Funds, commercial loans were flat and total loans
increased $36.6 million.
Table 5
LOANS BY CATEGORY
(Dollars in Thousands) As of December 31,
1993 1992 1991 1990 1989
Commercial, Financial and
Agricultural $ 46,963 $57,188 $57,692 $78,279 $78,124
Real Estate - Construction 22,968 19,103 18,714 14,527 17,284
Real Estate - Mortgage 242,741 212,080 208,091 206,600 206,712
Consumer 93,895 89,848 89,529 90,468 89,067
Total Loans $406,567 $378,219 $374,026 $389,874 $391,187
The Company's average loan-to-deposit ratio has decreased over the last three
years from 67.5% in 1991 to 60.6% in 1993. The reduction in this percentage in
1993 was attributable more to the acquisition of $44 million in deposits than
the lack of loan growth.
<PAGE>
Real estate construction and mortgage loans, combined, represented 65.4% of
total loans in 1993 versus 61.1% in 1992. See the section entitled "Risk Element
Assets" for a discussion concerning loan concentrations.
Table 6 arrays the Company's total loan portfolio as of December 31, 1993, based
upon repricing opportunities. Loans are arrayed as to those which can be
repriced in one year or less, over one through five years and over five years.
Demand loans and overdrafts are reported in the category of one year or less.
As a percent of the total portfolio, loans with a fixed interest rate have
declined from 55.2% in 1992 to 46.9% in 1993.
Table 6
LOAN REPRICING OPPORTUNITIES
(Dollars in Thousands)
Repricing Periods
Over One Over
One Year Through Five
Or Less Five Years Years Total
Commercial, Financial and
Agricultural $ 36,677 $ 8,990 $ 1,296 $ 46,963
Real Estate 185,355 64,846 15,508 265,709
Consumer 63,063 30,330 502 93,895
Total $285,095 $104,166 $17,306 $406,567
Loans with Fixed Rates $ 90,917 $ 83,605 $16,109 $190,631
Loans with Floating or
Adjustable Rates 194,178 20,561 1,197 215,936
Total $285,095 $104,166 $17,306 $406,567
Allowance for Loan Losses
Management attempts to maintain the allowance for loan losses at a level
sufficient to provide for potential losses in the loan portfolio. 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.
Management evaluates the adequacy of the allowance for loan losses on a
quarterly basis. The evaluations are based on the collectibility of loans and
take into consideration such factors as growth and composition of the loan
portfolio, evaluation of potential losses, past loss experience and general
economic conditions. As part of these evaluations, management reviews all loans
which have been classified internally or through regulatory examination and, if
appropriate, allocates a specific reserve to each of these individual loans.
Further, management establishes a general reserve to provide for potential
losses which are, as yet, unidentified in the loan portfolio. The general
reserve is based upon historical experience. The allowance for loan losses is
compared against the sum of the specific reserves plus the general reserve and
adjustments are made, as appropriate. Table 7 analyzes the activity in the
allowance over the last five years.
<PAGE>
Table 7
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(Dollars in Thousands)
For the Years Ended December 31,
1993 1992 1991 1990 1989
Balance at Beginning of Year $7,585 $7,670 $7,526 $6,168 $5,355
Allowance for Loan Losses
Acquired Through Acquisition - - - - 186
Charge-Offs:
Commercial, Financial
and Agricultural 556 511 724 878 911
Real Estate - Construction - 33 - - -
Real Estate - Mortgage 81 460 175 169 178
Consumer 884 929 1,263 1,331 1,180
Total Charge-Offs 1,521 1,933 2,162 2,378 2,269
Recoveries:
Commercial, Financial
and Agricultural 198 231 177 126 109
Real Estate - Construction - - - - -
Real Estate - Mortgage 8 7 18 14 21
Consumer 364 394 294 254 319
Total Recoveries 570 632 489 394 449
Net Charge-Offs 951 1,301 1,673 1,984 1,820
Provision for Loan Losses 960 1,216 1,817 3,342 2,447
Balance at End of Year $7,594 $7,585 $7,670 $7,526 $6,168
Ratio of Net Charge-Offs During
Year to Average Loans Out-
standing, Net Unearned Interest .25% .36% .45% .52% .48%
Allowance for Loan Losses as
Percentage of Loans, Net of Un-
earned Interest, at End of Year 1.90% 2.05% 2.10% 1.98% 1.62%
Allowance for Loan Losses as a
Multiple of Net Charge-Offs 7.99x 5.83x 4.58x 3.79x 3.39x
The allowance for loan losses at December 31, 1993 of $7.6 million equals 1.90%
of year-end loans. This compares to $7.6 million, or 2.05% in 1992, and $7.7
million, or 2.10% in 1991. The level of the allowance remains unchanged from
1992. The reduction in the percentage of the allowance relative to total loans
is attributable to loan growth during the year.
Management closely monitors its nonperforming loans, allocated reserves and any
potential for loss. With the uncertainty surrounding the economy in recent
years and the level of nonperforming loans, management has considered it prudent
to maintain the allowance at a level above that of historical levels. If,
during 1994, management is successful in reducing the level of nonperforming
loans, net charge-offs remain low and the economy continues to show evidence of
improvement, management may then be afforded the opportunity to reduce the
allowance from these historically high levels.
<PAGE>
There can be no assurance that in particular periods the Company will not
sustain loan losses which are substantial in relation to the size of the
allowance. When establishing a provision, management makes various estimates
regarding the value of collateral and future economic events. Actual experience
may differ from these estimates. It is management's opinion that the allowance
at December 31, 1993, is adequate to absorb possible losses from loans in the
portfolio as of year-end.
Table 8 provides an allocation of the allowance for loan losses to specific loan
categories for each of the last five years. The unallocated portion of the
allowance is the residual after allocating to specific loan categories and is
intended to provide a cushion to absorb potential unidentified losses. The
Company's method of establishing the allowance does not permit a precise
allocation of the allowance by loan category since such an allocation is not as
critical as management's assessment of the adequacy of the allowance in total.
However, in response to regulatory disclosure requirements, the information in
Table 8 is presented based upon management's best estimates utilizing available
information such as regulatory examinations, internal loan reviews and
historical charge-off levels.
<PAGE>
<TABLE>
Table 8
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars in Thousands)
<CAPTION>
1993 1992 1991 1990 1989
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
in Each in Each in Each in Each in Each
Allow- Category Allow- Category Allow- Category Allow- Category Allow- Category
ance To Total ance To Total ance To Total ance To Total ance To Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, Financial
and Agricultural $ 936 11.6% $1,416 15.1% $1,699 15.4% $1,293 20.1% $1,050 20.0%
Real Estate:
Construction 501 5.6% 647 5.0% 955 5.0% 628 3.7% 1,017 4.4%
Mortgage 2,459 59.7% 2,715 56.1% 2,148 55.7% 3,354 53.0% 2,061 52.8%
Consumer 420 23.1% 425 23.8% 741 23.9% 1,402 23.2% 1,532 22.8%
Not Allocated 3,278 - 2,382 - 2,127 - 849 - 508 -
Total $ 7,594 100.0% $7,585 100.0% $7,670 100.0% $7,526 100.0% $6,168 100.0%
</TABLE>
<PAGE>
Risk Element Assets
Risk element assets consists 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 the Company'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.
Table 9
RISK ELEMENT ASSETS
(Dollars in Thousands)
As of December 31,
1993 1992 1991 1990 1989
Nonaccruing Loans $ 9,353 $ 6,987 $ 8,423 $10,898 $5,229
Restructured 65 169 176 297 522
Total Nonperforming Loans 9,418 7,156 8,599 11,195 5,751
Other Real Estate 3,466 4,416 4,385 3,253 882
Total Nonperforming Assets $12,884 $11,572 $12,984 $14,448 $6,633
Past Due 90 Days or More $ 104 $ 2,564 $ 622 $ 1,671 $1,206
Nonperforming Loans to Loans,
Net of Unearned Interest 2.36% 1.93% 2.36% 2.95% 1.51%
Nonperforming Assets to Loans,
Net of Unearned Interest
Plus Other Real Estate 3.20% 3.09% 3.52% 3.77% 1.74%
Nonperforming Assets to Capital(1) 17.24% 16.36% 19.86% 23.70% 11.41%
Reserve to Nonperforming Loans 80.64% 105.99% 89.20% 67.23% 107.25%
(1) For computation of this percentage, "capital" refers to shareholders' equity
plus the allowance for loan losses.
The Company's nonaccruing loans increased $2.4 million, or 33.9%, from a level
of $7.0 million at December 31, 1992 to $9.4 million at December 31, 1993.
During 1993, loans totalling approximately $5.0 million were placed on
nonaccrual, while loans totalling $2.6 million were removed from nonaccruing
status. Of the $5.0 million, three credit relationships comprised $3.8 million
of the total. All three relationships are secured with real estate and
management has allocated specific reserves to these credits to absorb any
anticipated losses. Of the $2.6 million removed from the nonaccrual category,
$910,000 was transferred to other real estate and $413,000 was charged-off. The
remaining decrease of $1.3 million represents principal reductions, loans which
were refinanced and loans which were brought current and returned to an accrual
basis.
The majority of nonaccrual loans are collateralized with real estate.
Management continually reviews these loans and believes specific reserve
allocations are sufficient to cover any potential loss exposure associated with
these loans.
<PAGE>
Interest on nonaccrual loans is 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 nonaccruing loans had been
on a fully accruing basis, interest income recorded would have been $846,000
higher for the year ended December 31, 1993. Restructured loans, which are
those loans with reduced interest rates or deferred payment terms due to
deterioration in the financial position of the borrower, were nominal.
Other real estate totalled $3.4 million at December 31, 1993, versus $4.4
million at December 31, 1992. This category includes property owned by Group
banks which was acquired either through foreclosure procedures or by receiving a
deed in lieu of foreclosure. During 1993, the Company added approximately 8
properties totalling $910,000 and liquidated, partially or completely, 18 other
properties totalling $1.9 million, resulting in a net reduction in other real
estate of $1.0 million. Two properties accounted for $653,000 of the $910,000
in total additions during 1993. At the current time, management does not
anticipate any significant losses associated with other real estate.
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 totalled $192,000 at December 31,
1993. In management's judgement these loans are adequately collateralized and
no significant losses are anticipated.
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 amounts exceed
10% of total loans. Due to the lack of diversified industry within the markets
served by the Group banks, and the relatively close proximity of the markets,
the Company has both geographic concentrations as well as concentrations in the
types of loans funded. Seven of the ten Group banks representing 81% of the
Company's total loans at year-end are located within a thirty-mile radius of one
another. Further, due to the nature of the Company's markets, a significant
portion of the portfolio is associated either directly or indirectly with real
estate. At December 31, 1993, approximately 65% of the portfolio consisted of
real estate loans. Residential properties, including land acquisition and
development loans for residential projects, comprise approximately 51% of the
real estate portfolio.
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, 1993, 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 will continue to focus
its attention on promptly identifying and providing for potential losses as they
arise.
Investment Securities
The investment portfolio is a significant component of the Company's operations
and, as such, it functions as a key element of liquidity and asset/liability
management. It is not management's intent nor practice to participate in the
trading of investment securities for the purpose of recognizing gains. At the
time of purchase, management has both the ability and the intent to hold the
securities for the foreseeable future and thus the securities are carried on the
books at amortized cost, adjusted for the amortization of premiums and accretion
<PAGE>
of discounts. Sales of securities are minimal and the gains or losses
recognized from such sales are not material to the Company's financial
performance. See the section entitled "Accounting Pronouncements" on page 38
for a discussion of Statement of Financial Accounting Standards No. 115 -
"Accounting for Certain Investments in Debt and Equity Securities", which was
adopted by the Company on January 1, 1994.
In 1993, proceeds from "called" bonds and principal redemption of mortgage-
backed securities totalled $31.7 million and the Company recognized gains of
$69,000 and losses of $41,000. Proceeds from the sale of securities were
nominal.
During 1993, the Company's average investment portfolio increased 22.7% from
$167.2 million in 1992 to $205.1 million in 1993. The growth in the investment
portfolio is primarily due to the lack of loan production in recent years. As
discussed previously, management made a conscious decision to shift from tax-
exempt to taxable securities in response to lower tax rates and the
ramifications of the Tax Reform Act of 1986. Tax-exempt securities as a percent
of the total investment portfolio have declined from 70.8% in 1986 to 31.8% at
December 31, 1993. Management will, however, continue to purchase "bank
qualified" municipal issues when it considers the yield to be attractive and the
Company can do so without adversely impacting its tax position. In 1993, the
tax-exempt investment portfolio increased, on average, $13.5 million, or 26.0%,
which is the largest increase since 1986, reflecting a more favorable market for
tax-exempt securities.
The average maturity of the portfolio at December 31, 1993 and 1992, was 2.34
and 1.81 years, respectively. During 1993, the average maturity for U.S.
Treasury and Government Agency securities increased from 1.12 to 1.80 years. The
average maturity for municipal securities increased from 2.82 to 3.64 years.
The weighted average taxable-equivalent yield of the investment portfolio at
December 31, 1993, was 5.51% versus 6.54% in 1992. The quality of the municipal
portfolio at such date is depicted in the chart to the right. There were no
investments in obligations of any one state, municipality, political subdivision
or any other issuer that exceeded 10% of the Company's shareholders' equity at
December 31, 1993.
The unrealized gain in the portfolio at December 31, 1993, of $2.7 million
compares with $3.8 million at December 31, 1992. Tables 10 and 11 present a
detailed analysis of the Company's investment securities as to type, maturity
and yield.
Table 10
DISTRIBUTION OF INVESTMENT SECURITIES
(Carrying Value - Dollars in Thousands)
As of December 31,
1993 1992 1991
U.S. Treasury $111,233 $100,946 $74,693
Government Agencies and Corporations 35,315 25,365 7,951
States and Political Subdivisions 67,070 55,984 51,363
Other Securities 5,005 4,142 3,899
Total Investment Securities $218,623 $186,437 $137,906
<PAGE>
Table 11
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
(Dollars in Thousands)
As of December 31, 1993
Weighted
Carrying Value Market Value Average Yield(1)
U. S. GOVERNMENTS
Due in 1 year or less $ 53,756 $ 53,904 5.48%
Due over 1 year thru 5 years 87,248 87,371 4.50%
Due over 5 years thru 10 years 4,596 5,067 5.82%
Due over 10 years 948 934 6.28%
TOTAL $146,548 $147,276 4.91%
MUNICIPALS
Due in 1 year or less $ 9,827 $ 9,958 8.51%
Due over 1 year thru 5 years 36,629 38,088 7.44%
Due over 5 years thru 10 years 19,960 20,256 6.25%
Due over 10 years 654 647 6.48%
TOTAL $ 67,070 $ 68,949 7.23%
Other Securities $ 5,005 $ 5,049
Total Investment Securities $218,623 $221,274
(1) Weighted average yields are calculated on the basis of the carrying value of
the security. The weighted average yields on tax-exempt obligations are computed
on a taxable-equivalent basis using a 34% tax rate.
Carrying Value
Moody's Rating (000's) Percentage
AAA $ 39,750 59.3%
AA-1 1,170 1.7%
AA 3,535 5.3%
A-1 5,400 8.1%
A 9,285 13.8%
BAA 1,000 1.5%
Not Rated(1) 6,930 10.3%
Total $ 67,070 100.0%
(1) Of the securities not rated by Moody's, $4.3 million are rated "A" or higher
by S & P.
Deposits
Average total deposits increased from $573.2 million in 1992 to $630.3 million
in 1993. Contributing to this growth was the acquisition of approximately $44
million in deposits during the first quarter of 1993. The most significant
developments during 1992-3 were the strong growth in noninterest bearing
deposits and the shift in funding sources from "Other Time" to other deposit
categories. As a percent of average total deposits, noninterest bearing
increased from 21.5% in 1991 to 23.7% in 1993, while "Other Time" deposits
decreased from 45.0% to 33.1%. These two developments have had a favorable
impact on the Company's net interest margin.
<PAGE>
Both developments discussed in the preceding paragraph run counter to the
Company's historical trends. Since the Company's formation in 1984, two major
trends have impacted the mix of deposits. First, the shift from noninterest
bearing to interest bearing, and second, a majority of the Company's deposit
growth during this period has been in certificates of deposit, which
traditionally represent the highest yielding deposit offering.
The historical shift from noninterest bearing to interest bearing deposits is a
result of deregulation which began in the early 1980's, and has adversely
affected the Company's net interest margin. Based on annual averages, interest
bearing deposits as a percent of total deposits has increased from 62.8% in 1984
to 76.3% in 1993, which is down from 1991 when this percent reached 78.5%.
Historically, a majority of the Company's deposit growth has been in the
category of "Other Time", which consists primarily of certificates of deposit.
This growth was generated both internally and through acquisitions. However,
during the last two years, deposit growth from interest bearing sources came
primarily from the category of "Savings". Since 1991, the average balance for
Savings has increased 161.2% from $43.6 million to $113.9 million in 1993, while
the average balance for Other Time deposits decreased 15.1% from $246.0 million
to $208.7 million. This shift in the source of deposit growth from Other Time
to Savings is due to the low interest rate environment, particularly during
periods when yields on certificates of deposit were below the regular savings
rate.
Table 2 on page 15 provides an analysis of the Company's average deposits, by
category, and average rates paid thereon for each of the last three years.
Table 12 reflects the shift in the Company's deposit mix over the last three
years and Table 13 provides a maturity distribution of time deposits in
denominations of $100,000 and over.
Table 12
SOURCES OF DEPOSIT GROWTH
(Average Balances - Dollars in Thousands)
1992 to Percentage
1993 of Total Components of Total Deposits
Change Change 1993 1992 1991
Noninterest Bearing
Deposits $21,072 36.9% 23.7% 22.4% 21.5%
NOW Accounts 10,964 19.2 12.4 11.7 11.4
Money Market Accounts 5,954 10.4 12.7 12.9 14.1
Savings 21,797 38.1 18.1 16.1 8.0
Other Time (2,625) (4.6) 33.1 36.9 45.0
Total Deposits $57,162 100.0% 100.0% 100.0% 100.0%
<PAGE>
Table 13
MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 OR OVER
(Dollars in Thousands)
December 31, 1993
Time Certificates of Deposit Percent
Three months or less $11,961 29.2%
Over three through six months 11,291 27.6
Over six through twelve months 11,313 27.6
Over twelve months 6,371 15.6
Total $40,936 100.0%
Liquidity and Capital Resources
Liquidity for a banking institution is the availability of funds to meet
increased loan demand and/or excessive deposit withdrawals. Management monitors
the Company's financial position to ensure it 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 such as the
collection of interest and fees, federal funds sold, loan and investment
maturities, bank lines of credit for the Company and approved lines for the
purchase of federal funds by the Group banks.
On January 24, 1992, the Company established a $6.0 million revolving line of
credit with Trust Company Bank, Atlanta, Georgia, and simultaneously amended its
master note and loan agreement with Wachovia Bank of Georgia to provide for a
$6.0 million revolving line of credit. The Trust Company facility expired on
January 24, 1994, and was renewed until January 24, 1996. The Wachovia facility
expires on May 31, 1994. At the expiration of the Wachovia line, the Company
has the option to pay the loan or convert the outstanding balance to a term loan
which will amortize in 24 equal quarterly installments. As of December 31,
1993, the Company had debt outstanding of $1.4 million with Trust Company and
$500,000 with Wachovia. During 1993, the Company borrowed additional funds
totalling $1.4 million and made principal reductions on the Wachovia line
totalling $1.5 million, leaving an outstanding balance at year-end of $1.9
million. The average rate on debt outstanding during 1993 was 4.06%. See Note
10 in the Notes to Financial Statements for additional information on the
Company's debt.
The Company's long-term debt agreements impose 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 bank holding
companies by its bank subsidiaries. Based on the Company's current financial
condition, these limitations and/or regulations do not impair the Company's
ability to meet its cash obligations or limit the Company's ability to pay
future dividends on its common stock. See Notes 10 and 14 in the Notes to
Financial Statements for additional information.
<PAGE>
Federal Funds Purchased and Securities Sold Under Repurchase Agreements
(Dollars in Thousands)
1993 1992 1991
Year End Balance $23,264 $17,561 $14,912
Rate at Year End 2.78% 2.53% 3.60%
Average Balance $17,765 $18,163 $19,017
Average Rate 3.08% 2.95% 5.24%
Maximum Outstanding at Month-End $27,449 $26,441 $24,026
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. At
December 31, 1993, the Company had $97.6 million in commitments to extend credit
and $1.9 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
the Company to guarantee the performance of a customer to a third party. The
Company uses the same credit policies in establishing commitments and issuing
letters of credit as it does for on-balance-sheet instruments. If obligations
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.
It is anticipated capital expenditures for purposes of refurbishing certain bank
facilities and purchasing equipment will approximate $3.7 million over the next
twelve months. Over the next five years the Company anticipates spending $4.9
million (including the $3.7 million) on refurbishing existing locations and
building and equipping new branch facilities. Management believes these capital
expenditures can be funded internally without impairing the Company's ability to
meet its on-going obligations.
Shareholders' equity as of December 31, for each of the last three years is
presented below.
Shareholders' Equity
(Dollars in Thousands)
1993 1992 1991
Common Stock $ 31 $ 31 $ 31
Surplus 5,857 5,857 5,858
Retained Earnings 67,753 61,937 55,842
Subtotal 73,641 67,825 61,731
Less: Treasury Stock (6,501) (4,656) (4,008)
Total Shareholders' Equity $67,140 $63,169 $57,723
<PAGE>
The Company continues to maintain a strong capital position. The ratio of
shareholders' equity to total assets at year-end was 8.81%, 9.20% and 9.03% in
1993, 1992 and 1991, respectively, which ratios exceeded all minimum required
regulatory capital levels. The lower capital ratio in 1993 primarily reflects
the purchase of $1.8 million in treasury stock during the year. The Company has
traditionally satisfied its regulatory capital requirements through earnings,
and expects to continue to do so.
The company 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 in effect at December 31,
1993 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. Capital City Bank Group, Inc., significantly exceeded these capital
guidelines, with a total risk-based capital ratio of 16.3% and a Tier I ratio of
15.1%.
In addition, a tangible leverage ratio is now being used in connection with the
risk-based capital standards and is defined as Tier I capital divided by average
assets. The minimum leverage ratio under this standard is 3% for the highest-
rated bank holding companies which are not undertaking significant expansion
programs. An additional 1% to 2% may be required for other companies, depending
upon their regulatory ratings and expansion plans. On December 31, the Company
had a leverage ratio of 8.6%, which is in excess of regulatory requirements.
In 1993, the Board of Directors declared dividends totalling $.83 per share,
consisting of $.10 per share payable in July 1993 and $.73 per share payable in
January 1994. The Company declared dividends of $.78 per share in 1992 and $.73
per share in 1991.
The dividend payout ratio was 29.4%, 27.3% and 29.7% for 1993, 1992 and 1991,
respectively. Dividends declared in 1993 represented a 6.4% increase over 1992.
At December 31, 1993, the Company's common stock had a book value of $23.56 per
share compared to $21.59 in 1992 and $19.55 in 1991. There is currently no
established trading market for the common stock of Capital City Bank Group,
Inc., and therefore, no bid or sale quotations are generally available. Based
on sales of stock of which the Company has knowledge, the stock has traded in a
range of $24.00 to $26.00 per share for the two-year period ended December 31,
1993, with the most recent trades at $26.00 per share.
The Company began a stock repurchase plan in 1989, which remains in effect and
provides for the repurchase of up to 300,000 shares. As of December 31, 1993,
the Company has repurchased 255,927 shares, of which 77,011 shares were acquired
during 1993. The shares acquired in 1993 were purchased at an average cost of
$24.00 per share. Shares acquired under the plan are currently being held as
treasury stock. On January 21, 1994, 2,218 shares were issued to participants
for achieving certain established performance goals for the year ended December
31, 1993. The total value of the shares issued was $57,668 based on a stock
price of $26.00 per share.
Interest Rate Sensitivity
Table 14 on page 37 presents the Company's consolidated interest rate
sensitivity position as of year-end 1993. The objective of interest rate
sensitivity analysis is to attempt to measure the impact on the Company's net
interest income due to fluctuations in interest rates. Interest rate
sensitivity is managed at the bank level, enabling bank management to
<PAGE>
incorporate its own interest rate projections, liquidity needs and factors
specific to the local market into the analysis. As such, the Company does not
manage its interest rate sensitivity from a consolidated position. The
information in Table 14 has been assembled and presented in response to
regulatory reporting requirements.
<PAGE>
<TABLE>
Table 14
INTEREST RATE SENSITIVITY ANALYSIS
(Dollars in Thousands)
<CAPTION>
December 31, 1993
Non-Rate
Sensitive &
0-90 Days 91-180 Days 181-365 Days Over One Year Total
<S> <C> <C> <C> <C> <C>
Loans, Net of Unearned Interest $138,673 $ 50,286 $ 91,126 $119,339 $399,424
Investment Securities 20,811 16,688 31,089 150,035 218,623
Funds Sold 57,226 - - - 57,226
Total Earning Assets 216,710 66,974 122,215 269,374 675,273
Cash, Property and Other Assets - - - 94,656 94,656
Less: Allowance for Loan Losses - - - (7,594) (7,594)
Total Assets $216,710 $ 66,974 $122,215 $356,436 $762,335
Demand Deposits - - - $171,985 $171,985
NOW Accounts 100,184 - - - 100,184
Money Market 77,302 - - - 77,302
Savings 110,128 - - - 110,128
Other Time 55,326 59,789 50,597 37,434 203,146
Total Deposits 342,940 59,789 50,597 209,419 662,745
Funds Purchased 23,264 - - - 23,264
Other Borrowed Funds 1,000 - - 201 1,202
Long-Term Debt - - - - 1,900
Other Liabilities - - - 6,085 6,085
Shareholders' Equity - - - 67,140 67,140
Total Liabilities
& Shareholders' Equity $ 369,104 $ 59,789 $ 50,597 $282,845 $762,335
Interest Rate Sensitivity Gap $(152,394) $ 7,185 $ 71,618
Cumulative Interest Rate
Sensitivity Gap $(152,394) $(145,209) $(73,591)
Cumulative Gap as Percentage
of Earning Assets (22.57%) (21.50%) (10.90%)
</TABLE>
<PAGE>
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 change 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 the Company's ability to react to changing interest rates and are
discussed in further detail in the section entitled "Earnings Analysis"
beginning on page 13.
Accounting Pronouncements
The Company adopted SFAS No. 109, "Accounting for Income Taxes," which changed
the accounting for income taxes to the asset and liability method from the
deferral method previously required by Accounting Principles Board Opinion 11.
A tax expense of $484,000 reflecting the cumulative effect of adopting this new
standard is included in 1993 net income. The adoption of SFAS No. 109 will not
impact the effective tax rate. However, since SFAS No. 109 requires that
deferred tax assets and liabilities be adjusted to reflect the effect of tax law
or rate changes, the outcome of future tax legislation may have an impact on
future income tax expense.
The Financial Accounting Standards Board ("FASB") issued a new accounting
pronouncement "Accounting for Certain Investments in Debt and Equity Securities"
which is effective for fiscal years beginning after December 15, 1993. The
pronouncement requires securities be classified into three categories: (1) Held
to Maturity, (2) Available for Sale, and (3) Trading. Category three is not
applicable since the Company does not engage in securities trading. The
criteria for maintaining securities in the "Held To Maturity" category are
restrictive and the ability to sell a security in this category is very limited.
Management believes to properly manage interest rate risks and liquidity it is
prudent to place a portion (approximately 30%) of the investment portfolio into
the "Available for Sale" category. This was done in January of 1994. See Note 1
in the Notes to Financial Statements. Securities remaining in the "Held To
Maturity" category will be reported at amortized cost, without recognition of
unrealized gains and losses, which is consistent with the Company's prior
accounting practices. Securities in the "Available For Sale" category will be
reported at fair value with unrealized gains and losses reported as a separate
component of shareholders' equity. When the statement was adopted in January
1994, it resulted in the addition, net of deferred taxes, of approximately
$847,000, or 1.3%, to the Company's equity capital.
In May 1993, the Financial Accounting Standards Board issued Statement No. 114 -
"Accounting by Creditors for Impairment of a Loan." This statement requires
that impaired loans be measured based on the present value of expected future
cash flows discounted at the loans effective interest rate, or at the loan's
observable market price, or at the fair value of the collateral if the loan is
collateral dependent. The statement applies to financial statements for fiscal
years beginning after December 15, 1994. Management has not yet determined the
impact, if any, this statement may have on the Company's financial condition or
results of operations when adopted on a prospective basis in 1995.
In December 1990, FASB issued SFAS No. 106, "Employers' Accounting for Post-
Retirement Benefits Other Than Pension," which requires that the projected
<PAGE>
future cost of providing post-retirement health care and other benefits be
recognized as employees provide services to earn those benefits. The Company
does not offer post-retirement benefits, thus this statement is not applicable.
SFAS No. 112, "Employers' Accounting for Post-Employment Benefits," which is
effective for fiscal years beginning after December 15, 1993, requires employers
who provide benefits to former or inactive employees after employment, but
before retirement, to recognize these obligations as employees provide services
to earn the benefits. The Company does not offer post-employment benefits, thus
this statement is not applicable.
<PAGE>
Item 8. Financial Statements and Supplementary Data
41
Report of Independent Accountants
42
Consolidated Statements of Condition
43
Consolidated Statements of Income
45
Consolidated and Parent Company Statements of Shareholders' Equity
46
Consolidated Statements of Cash Flows
47
Notes to Financial Statements
<PAGE>
Report of Independent Accountants
Shareholders and Board of Directors
Capital City Bank Group, Inc.
Tallahassee, Florida
We have audited the accompanying consolidated statements of condition of Capital
City Bank Group, Inc., and subsidiaries as of December 31, 1993 and 1992, and
the related statements of income, shareholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1993. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Capital City Bank
Group, Inc., as of December 31, 1993 and 1992, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the Financial Statements, Capital City Bank Group,
Inc., changed its method of accounting for income taxes in 1993.
JAMES D. A. HOLLEY & CO.
Tallahassee, Florida
February 4, 1994
<PAGE>
Consolidated Statements of Condition
As of December 31,
1993 1992
ASSETS
Cash and Due From Banks $ 56,664,688 $43,690,111
Interest Bearing Deposits in Other Banks 1,256,516 1,955,817
Investment Securities (market value
$221,273,916 and $190,262,011 in 1993
and 1992) (Note 5) 218,622,520 186,437,464
Federal Funds Sold 55,970,000 61,625,000
Loans (Notes 6 and 7) 406,566,731 378,218,710
Unearned Interest (7,142,943) (8,308,084)
Allowance for Loan Losses (7,594,101) (7,584,958)
Loans, Net 391,829,687 362,325,668
Premises and Equipment (Note 8) 20,820,473 15,901,857
Accrued Interest Receivable 5,467,174 5,127,718
Intangibles (Note 2) 1,719,491 658,353
Other Assets 9,984,232 9,244,273
Total Assets $762,334,781 $686,966,261
LIABILITIES
Deposits:
Noninterest Bearing Deposits $171,984,693 $147,870,679
Interest Bearing Deposits (Note 9) 490,760,129 449,626,770
Total Deposits 662,744,822 597,497,449
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements 23,264,047 17,561,214
Short-Term Borrowings 1,201,565 1,221,123
Long-Term Debt (Note 10) 1,900,000 2,000,000
Other Liabilities 6,084,592 5,517,780
Total Liabilities 695,195,026 623,797,566
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value; 4,000,000 shares
authorized; 3,105,243 issued 31,052 31,052
Surplus 5,856,794 5,857,194
Retained Earnings 67,753,475 61,936,427
73,641,321 67,824,673
Treasury Stock: 255,927 shares in 1993
and 179,016 shares in 1992 at Cost (6,501,566) (4,655,978)
Total Shareholders' Equity 67,139,755 63,168,695
Total Liabilities and
Shareholders' Equity $762,334,781 $686,966,261
The accompanying Notes to Financial Statements are an integral part of these
statements.
<PAGE>
<TABLE>
Consolidated Statements of Income
<CAPTION>
For the Years Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $33,553,906 $34,871,997 $40,799,028
Investment Securities:
U.S. Treasury 5,564,028 6,010,708 5,375,881
U.S. Government Agencies and Corporations 1,620,772 990,632 488,951
States and Political Subdivisions 3,492,347 3,312,997 3,418,434
Other Securities 210,272 391,609 180,347
Deposits in Other Banks 118,674 444,254 751,827
Federal Funds Sold 1,835,283 2,284,360 3,787,068
Total Interest Income 46,395,282 48,306,557 54,801,536
INTEREST EXPENSE
Deposits 14,213,212 17,784,924 25,118,252
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 547,611 535,311 996,371
Other Short-Term Borrowings 23,252 32,422 46,657
Long-Term Debt 56,009 178,619 445,245
Total Interest Expense 14,840,084 18,531,276 26,606,525
Net Interest Income 31,555,198 29,775,281 28,195,011
Provision for Loan Losses (Note 7) 960,114 1,215,868 1,816,883
Net Interest Income After Provision for
Loan Losses 30,595,084 28,559,413 26,378,128
NONINTEREST INCOME
Income from Fiduciary Activities 643,360 583,248 484,834
Service Charges on Deposit Accounts 5,600,978 5,651,660 5,540,805
Data Processing 2,379,850 2,445,483 2,233,035
Securities Transactions (Note 5) 27,527 (2,147) 4,924
Other 3,362,683 2,800,331 2,550,096
Total Noninterest Income 12,014,398 11,478,575 10,813,694
NONINTEREST EXPENSE
Salaries and Employee Benefits (Note 12) 16,183,205 14,530,027 14,044,732
Occupancy, Net 2,182,842 2,022,418 1,846,015
Furniture and Equipment 2,908,648 2,861,428 2,837,667
Other 9,297,967 9,083,238 8,711,401
Total Noninterest Expense 30,572,662 28,497,111 27,439,815
Income Before Income Taxes and
Accounting Changes 12,036,820 11,540,877 9,752,007
<PAGE>
Income Taxes (Note 11) 3,308,614 3,164,341 2,479,531
Income Before Accounting Changes 8,728,206 8,376,536 7,272,476
Cumulative Effect of a Change in
Accounting Methods (Note 20) (484,495) - -
NET INCOME $ 8,243,711 $8,376,536 $ 7,272,476
Net Income Per Share Before Accounting Change $ 2.99 $ 2.86 $ 2.46
Net Income Per Share $ 2.82 $ 2.86 $ 2.46
Average Common Shares Outstanding 2,924,022 2,932,123 2,958,920
<F1>
The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated And Parent Company
Statements of Shareholders' Equity
<CAPTION>
Common Retained Treasury
Stock Surplus Earnings Stock Total
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1990 $31,052 $5,859,498 $50,726,252 $(3,173,136) $53,443,666
Net Income 7,272,476 7,272,476
Cash Dividends
($.73 per share) (2,156,376) (2,156,376)
Sale of Treasury Stock (1,800) 12,600 10,800
Purchase Treasury Stock (847,442) (847,442)
Balance,
December 31, 1991 31,052 5,857,698 55,842,352 (4,007,978) 57,723,124
Net Income 8,376,536 8,376,536
Cash Dividends
($.78 per share) (2,282,461) (2,282,461)
Sale of Treasury Stock (504) 3,528 3,024
Purchase Treasury Stock (651,528) 651,528)
Balance,
December 31, 1992 31,052 5,857,194 61,936,427 (4,655,978) 63,168,695
Net Income 8,243,711 8,243,711
Cash Dividends
($.83 per share) (2,426,663) (2,426,663)
Sale of Treasury Stock (400) 2,800 2,400
Purchase Treasury Stock (1,848,388) (1,848,388)
Balance, December 31,
1993 $31,052 $5,856,794 $67,753,475 $(6,501,566) $67,139,755
<F1>
The accompanying Notes to Financial Statements are an integral part of these statements.<PAGE>
Consolidated Statements of Cash Flows
</TABLE>
<PAGE>
For the Years Ended December 31,
1993 1992 1991
Net Income $8,243,711 $8,376,536 $7,272,476
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses 960,114 1,215,868 1,816,883
Depreciation 1,881,207 1,862,930 1,732,620
Amortization of Intangible Assets 337,994 259,171 302,915
Deferred Income Taxes 74,585 (143,529) (218,139)
Cumulative Effect of Accounting Change 484,495 - -
Net (Increase) Decrease in
Interest Receivable (339,456) 68,761 208,180
Net (Increase) Decrease in
Other Assets (1,393,182) (231,349) (986,758)
Net Increase (Decrease) in
Other Liabilities 318,515 (1,183,076) (151,038)
Net Cash from Operating Activities 10,567,983 10,225,312 9,977,139
Cash Flows from Investing Activities:
Proceeds from Payments/Maturities of
Investment Securities 82,540,933 31,163,153 45,083,468
Purchase of Investment Securities (114,725,989) (79,694,258) (65,614,794)
Net (Increase) Decrease in Loans (17,234,818) (6,438,547) 13,680,540
Purchase of Premises & Equipment (6,952,279) (1,337,346) (1,618,160)
Sales of Premises & Equipment 1,007,775 31,744 193,898
Cash Acquired in Bank Acquisitions 28,811,166 - -
Net Cash from Investing Activities (26,553,212) (56,275,254) (8,275,048)
Cash Flows from Financing Activities:
Net Increase (Decrease) in Deposits 21,150,418 42,405,239 4,755,974
Net Increase (Decrease) in Federal
Funds Purchased 5,702,833 2,648,874 (10,572,406)
Net Increase (Decrease) in Other
Borrowed Funds (19,558) (19,247) (606,217)
Addition to Long-Term Debt 1,400,000 - 403,800
Repayment of Long-Term Debt (1,500,000) (2,000,000) (2,628,800)
Dividends Paid (2,282,200) (2,153,230) (2,065,029)
Sale (Purchase) of Treasury Stock (1,845,988) (648,000) (834,842)
Net Cash from Financing Activities 22,605,505 40,233,636 (11,547,520)
Net Increase (Decrease) in Cash
and Cash Equivalents ( 6,620,276) (5,816,306) (9,845,429)
Cash and Cash Equivalents at Beginning
of Period 107,270,928 113,087,234 122,932,663
Cash and Cash Equivalents at End
of Period $113,891,204 $107,270,928 $113,087,234
The accompanying Notes to Financial Statements are an integral part of these
statements.
<PAGE>
Notes to Financial Statements
Note 1
SIGNIFICANT ACCOUNTING POLICIES
The Company and its subsidiaries follow generally accepted accounting principles
and reporting practices applicable to the banking industry. Prior year financial
statements and other statistical information have been reclassified to conform
to the presentation adopted for 1993. The principles which materially affect the
financial position, results of operations and cash flows are summarized below.
Principles of Consolidation
The consolidated financial statements include the accounts of Capital City Bank
Group, Inc., and its subsidiaries, all of which are wholly-owned. All material
intercompany transactions and accounts have been eliminated.
Investment Securities
Securities are carried at cost, adjusted for amortization of premiums and
accretion of discounts. Gains and losses on securities are accounted for by the
specific identification method.
The investment portfolio is a by-product of the Company's operations and, as
such, it functions as a key component of liquidity and asset/liability
management. It is not management's intent nor practice to participate in the
trading of investment securities. Sales of securities are minimal and the gains
or losses recognized from such sales are not material to the Company's financial
performance.
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115 ("Accounting for Certain Investments in Debt and Equity
Securities") and management transferred approximately 30% of the Company's
portfolio to the "Available for Sale" category. Securities transferred to the
"Available for Sale" category on the date the statement was adopted are as
follows: Amortized
Category Costs
U. S. Treasuries $31,364,293
U. S. Government Agencies and
Corporations 10,089,014
State and Political Subdivisions 20,853,825
Other Securities 500,000
Total Available for Sale $62,807,132
Securities in this category are recorded at fair value with unrealized gains and
losses, net of deferred taxes, reported as a separate component of equity
capital. Fluctuations in the net unrealized gain or loss will not impact the
Company's earnings.
Loans
Loans are stated at the principal amount outstanding. Interest income on certain
loans, which are made on the discount basis, is recognized using the sum-of-the-
months-digits method which does not differ materially from the interest method.
Interest income on all other loans, except for those designated as non-accrual
<PAGE>
loans, is accrued based on the outstanding daily balances. Under FASB Statement
No. 91, fees charged to originate loans and loan origination costs are to be
deferred and amortized over the life of the loan. Management has elected not to
net the costs against the loan fees but to defer only fees. The effect of this
practice does not have a material impact on the consolidated financial
statements.
Allowance for Possible Loan Losses
Provisions for possible loan losses are charged to operating expenses and added
to the allowance to maintain it at a level deemed appropriate by management to
absorb known and inherent risks in the loan portfolio. When establishing a
provision, management makes various estimates regarding the value of collateral
and future economic events. Actual future experience may differ from these
estimates. Recognized loan losses are charged to the allowance when loans are
deemed to be uncollectible due to such factors as the borrower's failure to pay
principal and interest or when loans are classified as losses under internal or
external review criteria. Recoveries of principal on loans previously charged-
off are added to the allowance.
Loans are placed on nonaccrual status when management believes the borrower's
financial condition, after giving consideration to economic conditions and
collection efforts, is such that collection of interest is doubtful. 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, in
full, is in doubt.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation,
computed on the straight-line method over estimated useful lives of thirty to
forty years for buildings and three to twenty years for fixtures and equipment.
Additions and major facilities are capitalized and depreciated in the same
manner. Repairs and maintenance are charged to operating expense as incurred.
Other Real Estate
Other real estate includes property owned by the Group banks which was acquired
either through foreclosure or by receiving a deed in lieu of foreclosure. The
properties are included in "other assets" on the statement of condition and are
recorded at an amount which approximates market. Other real estate totalled $3.4
and $4.4 million at December 31, 1993 and 1992, respectively.
Income Taxes
The Company and its subsidiaries file consolidated federal and state income tax
returns. In general, the parent company and its subsidiaries compute their tax
provisions (benefits) as separate entities prior to recognition of any tax
expenses (benefits) which may accrue from filing a consolidated return.
Effective January 1, 1993, the company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes", which mandates the
asset and liability method of accounting for deferred income taxes. The Company
had previously accounted for deferred taxes under the deferral method required
by Accounting Principles Board (APB) Opinion 11. The cumulative effect of
adopting the new accounting standard was a reduction in the Company's net income
of $484,495, which was recognized the first quarter of 1993. See Note 11 in
Notes to Financial Statements for further discussion.
<PAGE>
Note 2
Branch Acquisitions
On March 15, 1993, Capital City First National Bank, a wholly-owned subsidiary
of Capital City Bank Group, Inc., consummated the purchase and assumption of
three branch offices located in Citrus County, Florida. First National acquired
two of the office facilities and is leasing the third. In connection with these
acquisitions, First National assumed $37.0 million in deposits and purchased
$12.0 million in loans, consisting primarily of first mortgage residential real
estate loans.
On February 1, 1993, Branford State Bank, a wholly-owned subsidiary of Capital
City Bank Group, Inc., consummated the assumption of $7.0 million in deposits.
Loans purchased were minimal and no office facilities were acquired.
Assets and liabilities acquired through acquisition, on a combined basis, are as
follows:
1993
Loans $(13,229,315)
Premises & Equipment (855,319)
Other Assets (1,304,989)
Total Assets $44,200,789
Deposits 44,096,955
Other Liabilities 103,834
Cash Acquired in
Acquisitions $28,811,166
Intangible assets, including goodwill, recorded in connection with the Company's
acquisitions are being amortized over periods of one to twenty-five years with
the majority being written off over an average life of approximately 10 years.
Intangibles recorded during 1993 totalled $1.2 million. The pre-tax amortization
was $338,000 in 1993, $259,000 in 1992 and $303,000 in 1991. The amortization of
intangibles for each of the next five years is as follows:
Year Amount
1994 $363,000
1995 $284,000
1996 $244,000
1997 $185,000
1998 $159,000
Note 3
STATEMENT OF CASH FLOWS
The statement of cash flows is presented using the indirect method of
presentation. For purposes of this statement, the Company considers cash, due
from banks, interest bearing deposits in banks and federal funds sold to be cash
equivalents.
Supplemental Disclosures of Cash Flow Information:
1993 1992 1991
Cash paid during the year for:
Interest on Deposits and Other
Funds Purchased $14,943,964 $19,213,697 $26,921,413
Interest on Long-Term Debt 56,009 $ 178,619 $ 445,245
Taxes Paid 3,013,311 $ 2,763,567 $ 2,504,278
<PAGE>
Supplemental Schedule of Noncash Investing and Financing Activities:
1993 1992 1991
Loans Foreclosed and Transferred
to Other Real Estate $910,228 $2,311,826 $3,200,742
Note 4
CASH & DUE FROM BANK ACCOUNTS
Six of the ten Group banks are members of the Federal Reserve Bank of Atlanta
and are required to maintain reserve balances. The average amount of those
reserve balances for the years ended December 31, 1993 and 1992, was $25,031,000
and $24,168,000, respectively.
Note 5
INVESTMENT SECURITIES
The carrying value and related market value of investment securities at December
31, were as follows:
1993
Gross Gross
Carrying Market Unrealized Unrealized
Value Value
U.S. Treasury $111,233,251 $111,722,854 $ 578,434 $ 88,831
U.S. Government Agencies
and Corporations 35,314,555 35,552,676 320,299 82,178
States and Political
Subdivisions 67,069,825 68,949,454 1,991,218 111,589
Other Securities 5,004,889 5,048,932 47,657 3,614
Total Investment
Securities $218,622,520 $221,273,916 $2,937,608 $ 286,212
1992
Gross Gross
Carrying Market Unrealized Unrealized
Value Value Gains Losses
U.S. Treasury $100,946,059 $102,462,213 $l,516,154 -
U.S. Government Agencies
and Corporations 25,364,688 25,622,085 262,811 5,414
States and Political
Subdivisions 55,984,326 57,995,657 2,013,753 2,422
Other Securities 4,142,391 4,182,056 43,733 4,068
Total Investment
Securities $186,437,464 $190,262,011 $3,836,451 $11,904
<PAGE>
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 is presented below:
Total Gross Gross
Year Proceeds Realized Gains Realized Losses
1993 $31,681,176 69,249 41,722
1992 8,700,297 42,338 44,485
1991 917,837 10,051 5,127
Total proceeds in the above chart include principal reductions in mortgage
backed securities and proceeds from securities which were called of $31,581,176,
$8,293,692 and $585,693 in 1993, 1992 and 1991, respectively.
As of December 31, 1993, the Company's debt securities had the following
maturity distribution:
Carrying Value Market Value
Due in one year or less $ 68,588,734 $ 68,911,234
Due after one through five years 123,877,247 125,459,023
Due after five through ten years 24,554,631 25,322,697
Over ten years 1,601,908 1,580,962
Total Investment Securities $218,622,520 $221,273,916
Securities with a carrying value of $86,441,723 and $71,436,898 at December 31,
1993 and 1992, respectively, were pledged to secure public deposits and for
other purposes as required by law.
Note 6
LOANS
At December 31, the composition of the Company's loan portfolio was as follows:
1993 1992
Commercial, Financial and
Agricultural $ 46,962,666 $ 57,187,674
Real Estate - Construction 22,968,331 19,102,946
Real Estate - Mortgage 242,740,428 212,080,485
Consumer 93,895,306 89,847,605
Total Loans $ 406,566,731 $378,218,710
Nonaccruing loans amounted to $9,352,869 and $6,987,198 at December 31, 1993 and
1992, respectively. Restructured loans amounted to $64,661 and $169,314 at
December 31, 1993 and 1992, respectively. If such nonaccruing and restructured
loans had been on a fully accruing basis, interest income would have been
$846,000 higher in 1993 and $696,000 higher in 1992.
Due to the lack of diversified industry within the markets served by the Group
banks, a significant portion of the loan portfolio is associated either directly
or indirectly with real estate. At December 31, 1993, approximately 65% of the
portfolio consisted of real estate related loans.
<PAGE>
Note 7
ALLOWANCE FOR LOAN LOSSES
An analysis of the changes in the allowance for loan losses for the years ended
December 31, is as follows:
1993 1992 1991
Balance, Beginning of Year $7,584,958 $7,669,915 $7,526,414
Provision for Loan Losses 960,114 1,215,868 1,816,883
Recoveries on Loans
Previously Charged-Off 569,765 632,219 488,844
Loans Charged-Off (1,520,736) (1,933,044) (2,162,226)
Balance, End of Year $7,594,101 $7,584,958 $7,669,915
Note 8
PREMISES AND EQUIPMENT
The composition of the Company's premises and equipment at December 31, was as
follows:
1993 1992
Land $ 4,300,563 $ 4,112,299
Buildings 18,348,113 12,827,586
Fixtures and Equipment 14,358,167 13,457,612
37,006,843 30,397,497
Accumulated Depreciation (16,186,370) (14,495,640)
Premises and Equipment, Net $20,820,473 $15,901,857
Depreciation of $1,881,207, $1,862,930, and $1,732,620 was charged to operations
for 1993, 1992 and 1991, respectively.
Note 9
DEPOSITS
Interest bearing deposits, by category, as of December 31, are as follows:
1993 1992
NOW Accounts $100,184,541 $ 71,357,466
Money Market Accounts 77,301,643 71,719,744
Savings Accounts 110,127,691 111,206,053
Other Time Deposits 203,146,254 195,343,507
Total Interest Bearing Deposits $490,760,129 $449,626,770
Time deposits in denominations of $100,000 or more totalled $40,936,000 and
$45,658,000, at December 31, 1993 and 1992, respectively.
Interest expense for each of these deposit categories for the three years ended
December 31, is as follows:
<PAGE>
1993 1992 1991
NOW Accounts $ 1,616,631 $1,770,024 $2,786,570
Money Market Accounts 1,778,928 2,315,965 3,885,783
Savings Accounts 2,953,208 3,651,544 2,219,917
Other Time Deposits 7,864,445 10,047,391 16,225,982
Total $14,213,212 $17,784,924 $25,118,252
Note 10
LONG-TERM DEBT
On January 24, 1992, the Company established a $6.0 million revolving line of
credit with Trust Company Bank, Atlanta, Georgia, and simultaneously amended its
master note and loan agreement with Wachovia Bank of Georgia (formerly "The
First National Bank of Atlanta") to provide for a $6.0 million revolving line of
credit. The two credit facilities are collateralized by 100% of the common stock
of Capital City First National Bank of Tallahassee. The Trust Company facility
expires on January 24, 1996, and the Wachovia facility expires on May 31, 1994,
at which time the outstanding balance under the revolving line of credit may
convert to a term loan which will amortize in 24 equal quarterly installments.
As of December 31, 1993, there was $1.4 million outstanding to Trust Company and
$500,000 outstanding to Wachovia. Under the two credit facilities the Company,
at its option, may select from various loan rates including prime, LIBOR or the
certificate of deposit ("CD") rate, plus or minus increments thereof. The LIBOR
or CD rates may be fixed for a period of up to six months. The average interest
rate on debt outstanding during 1993 was 4.06%, and the weighted average rate at
year-end was 3.97%. The loan agreements place certain restrictions on the amount
of capital which must be maintained by the Company. On December 31, 1993, the
Company's capital exceeded the most restrictive covenants of either agreement.
Note 11
INCOME TAXES
The provision for income taxes reflected in the statement of income was
comprised of the following components:
1993 1992 1991
Currently Payable:
Federal $2,846,900 $2,903,663 $2,411,439
State 387,129 404,207 286,231
Deferred:
Federal 59,198 (129,880) (186,756)
State 15,387 (13,649) (31,383)
Total $3,308,614 $3,164,341 $2,479,531
The net deferred tax asset and liability and the temporary differences
comprising those balances at December 31, 1993, are detailed below:
1993
Deferred Tax Assets:
Allowance for Loan Losses $2,857,660
Deferred Loan Fees 313,883
Writedown of Real Estate Held for Sale 22,495
Other 72,369
Total Deferred Tax Assets $3,266,407
<PAGE>
Deferred Tax Liabilities:
Premises and Equipment 839,327
Employee Benefits 235,616
Other 30,039
Total Deferred Tax Liabilities 1,104,982
Net Deferred Tax Assets $2,161,425
Income taxes amounted to less than the tax expense computed by applying the
statutory federal income tax rates to income. The reasons for these differences
are as follows:
1993 1992 1991
Computed Tax Expense $4,092,519 $3,923,898 $3,315,682
Increases (Decreases)
Resulting From:
Tax-Exempt Interest Income (1,087,346) (1,001,370) (1,015,315)
State Income Taxes,
Net of Federal Income
Tax Benefits 265,660 257,768 168,200
Other 37,781 (15,955) 10,964
Actual Tax Expense $3,308,614 $3,164,341 $2,479,531
The items that caused timing differences and the resulting deferred income taxes
for 1992 and 1991, are as follows:
1992 1991
Asset Writedowns $(137,520) $ -
Provision for Loan Losses 30,736 (51,916)
Deferred Loan Fees (21,088) 12,297
Pension Expense 178,259 (205,883)
Depreciation (75,646) 26,990
Other (118,270) 373
Total $(143,529) $(218,139)
Note 12
EMPLOYEE BENEFITS
The Company sponsors a noncontributory pension plan covering substantially all
of its employees. Benefits under this plan generally are based on the employee'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 and amounts recognized in the Company's consolidated statements of
condition, and major assumptions used to determine these amounts.
1993 1992 1991
Components of Pension
Expense:
Service Cost $685,449 $674,980 $ 530,645
Interest Cost 845,301 763,211 742,002
Actual Return on Plan Assets (525,422) (363,931) (1,568,273)
Net Amortization and Deferral (330,861) (492,809) 915,451
Total $674,467 $581,451 $ 619,825
<PAGE>
Actuarial Present Value of
Projected Benefit Obligations:
Accumulated Benefit Obligations:
Vested $6,896,007 $5,833,309 $4,022,661
Nonvested 1,066,503 935,972 487,853
$7,962,510 $6,769,281 $4,510,514
Plan Assets at Fair Value
(primarily listed stocks and
bonds, U.S. Government secur-
ities and interest bearing
deposits) $10,898,324 $10,144,450 $9,105,747
Projected Benefit Obligation (11,824,763) (10,616,298) (9,311,574)
Plan Assets in Excess of:
Projected Benefit Obligation (926,439) (471,848) (205,827)
Unrecognized Net Loss 3,465,697 2,926,291 2,421,063
Unrecognized Net Asset (1,884,324) (2,120,407) (2,356,490)
Prepaid (Accrued) Pension Cost $ 654,934 $ 334,036 $ (141,254)
Major Assumptions:
Discount Rate 7.5% 8.0% 9.0%
Rate of Increase in
Compensation Levels 5.5% 6.0% 6.0%
Expected Long-Term Rate
of Return on Plan Assets 7.5% 8.5% 9.0%
The Company has a stock incentive plan under which shares of the Company's stock
are issued as incentive awards to selected participants. The cost of this plan
in 1993 was $354,000.
Note 13
RELATED PARTY TRANSACTIONS
The Chairman of the Board of Capital City Bank Group, Inc., is chairman of the
law firm which serves as general counsel to the Company and its subsidiaries.
Fees paid by the Company and its subsidiaries for these services, in aggregate,
approximated $266,000, $286,000, and $285,900 during 1993, 1992 and 1991,
respectively.
Under a lease agreement expiring in 2024, a bank subsidiary leases land from a
partnership in which several directors and officers have an interest. The lease
agreement provides for annual lease payments of approximately $51,900, to be
adjusted for inflation in future years.
At December 31, 1993 and 1992, certain officers and directors were indebted to
the Company's bank subsidiaries in the aggregate amount of $10,257,576 and
$12,463,712, respectively. During 1993, $7,709,884 in new loans were made and
repayments totalled $9,916,020. These loans were made on the same terms as loans
to other individuals of comparable creditworthiness.
Note 14
DIVIDEND RESTRICTIONS
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
<PAGE>
bank's net profits (as defined) for that year combined with its retained net
profits for the preceding two calendar years. In 1994, the subsidiaries may
declare dividends without regulatory approval of $7.8 million plus an additional
amount equal to the net profits of the Company's subsidiary banks for 1994 up to
the date of any such dividend declaration.
Note 15
SUPPLEMENTARY INFORMATION
Components of noninterest income and noninterest expense in excess of 1% of
total operating income, which are not disclosed separately elsewhere, are
presented below for each of the respective periods.
1993 1992 1991
Noninterest Expense:
Employee Insurance $ 954,397 $887,618* $808,694*
Payroll Taxes 879,249 802,370* 785,595*
Maintenance and Repairs 1,274,555 1,243,497 1,552,134
Professional Fees 659,414 468,418* 434,933*
Advertising 658,696 438,655* 615,638*
Printing & Supplies 1,065,122 875,023 934,818
Insurance (other than employee) 1,708,134 1,490,156 1,518,206
*Less than 1% of operating income in the year reported
Note 16
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 include commitments to extend credit and standby
letters of credit. The Company does not participate in financial guarantees,
options, interest rate caps and floors, interest rate swaps or futures
contracts.
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, 1993, the amounts associated with the Company's
off-balance-sheet obligations were as follows:
Off-Balance-Sheet Financial Instruments Amount
Commitments to Extend Credit(1) $97,647,248
Standby Letters of Credit 1,875,305
(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.
<PAGE>
Standby letters of credit are conditional commitments issued by the corporation
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.
Due to the close proximity and the nature of the markets served by the Group
banks, the Company has both a geographic concentration as well as a
concentration in the types of loans funded. Seven of the ten Group banks
representing 81% of the Company's total loans at year-end are located within a
30-mile radius. At December 31, 1993, approximately 65% of the Company's loan
portfolio consisted of real estate related loans.
Note 17
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate that value. 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.
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 Balances with Other Banks, Federal
Funds Sold, Federal Funds Purchased and Securities Sold Under Repurchase
Agreements, and Other Short-term Borrowings. 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 of loans with
similar financial characteristics. 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.
<PAGE>
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 the rates currently offered for deposits of similar remaining
maturities.
Long-Term Debt - Carrying value of the Company's long-term debt
approximates fair value due to the repricing frequency of the debt. The debt is
generally repriced every 90 to 180 days and all long-term debt currently
outstanding will reprice on or before March 31, 1994.
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 which have estimated fair values differing
from their respective carrying values are presented below.
As Of December 31,
1993 1992
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
Investment Securities $218,623 $221,274 $186,437 $190,262
Loans, Net of Allowance
for Loan Losses 391,830 394,171 362,326 363,891
Financial Liabilities:
Deposits 662,745 663,665 597,497 598,848
Certain financial instruments and all nonfinancial instruments are excluded from
the disclosure requirements. 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 18
PARENT COMPANY FINANCIAL INFORMATION
The following is a condensed statement of financial condition of the parent
company at December 31:
Parent Company Statements of Condition
1993 1992
ASSETS
Cash and Due from Banks $ 2,788,987 $2,607,749
Investment in Group Banks 68,733,692 64,719,116
Other Assets 358,919 206,597
Total Assets $71,881,598 $67,533,462
<PAGE>
LIABILITIES
Dividends Payable $ 2,134,240 $ 1,989,777
Long-Term Debt (Note 10) 1,900,000 2,000,000
Other Liabilities 707,603 374,990
Total Liabilities 4,741,843 4,364,767
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value; 4,000,000
shares authorized; 3,105,243 issued 31,052 31,052
Surplus 5,856,794 5,857,194
Retained Earnings 67,753,475 61,936,427
73,641,321 67,824,673
Treasury Stock: 255,927 shares in 1993
and 179,016 shares in 1992, at Cost (6,501,566) (4,655,978)
Total Shareholders' Equity 67,139,755 63,168,695
Total Liabilities and Shareholders' Equity $71,881,598 $67,533,462
The operating results of the parent company for the three years ended December
31 are shown below:
Parent Company Statements of Income
1993 1992 1991
OPERATING INCOME
Income Received from Group Banks:
Dividends (Note 14) $4,675,000 $4,800,000 $5,800,000
Group Overhead Fees 1,985,566 2,017,566 1,846,977
Total Operating Income 6,660,566 6,817,566 7,646,977
OPERATING EXPENSE
Salaries and Employee Benefits 1,617,059 1,138,963 1,108,250
Legal Fees 63,458 47,936 30,004
Professional Fees 171,291 137,393 145,008
Advertising 432,978 304,886 377,360
Travel and Entertainment 62,481 49,783 36,246
Amortization of Excess of Purchase Price
Over Book Value of Net Assets Acquired 51,617 56,818 146,745
Interest on Debt 56,009 178,619 445,245
Dues and Memberships 41,601 44,598 39,882
Other 180,176 239,705 220,476
Total Operating Expense 2,676,670 2,198,701 2,549,216
Income Before Income Taxes and Equity
in Undistributed Earnings of Group Banks 3,983,896 4,618,865 5,097,761
Income Tax Expense (Benefit) (229,736) (81,497) (264,098)
Income Before Equity in Undistributed
Earnings of Group Banks 4,213,632 4,700,362 5,361,859
Equity in Undistributed Earnings
of Group Banks 4,030,079 3,676,174 1,910,617
Net Income $8,243,711 $8,376,536 $7,272,476
<PAGE>
The cash flows for the parent company for the three years ended December 31 were
as follows:
Parent Company Statements of Cash Flows
1993 1992 1991
Net Income $8,243,711 $8,376,536 $7,272,476
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Equity in Earnings of Group Banks (8,705,079) (8,476,174) (7,710,617)
Amortization of Excess of Purchase
Price Over Book Value of Net
Assets Acquired 51,038 56,818 146,745
(Increase) Decrease in Other Assets (187,857) 163,945 (1,702)
Net Increase (Decrease) in
Other Liabilities 332,613 (54,215) (9,434)
Net Cash from Operating Activities (265,574) 66,910 (302,532)
Cash Flows from Investing Activities:
Dividends Received from Group Banks 4,675,000 4,800,000 5,800,000
Cash Flows from Financing Activities:
Addition to Long-Term Debt 1,400,000 - 403,800
Repayment of Long-Term Debt (1,500,000) (2,000,000) (2,628,800)
Payment of Dividends (2,282,200) (2,153,230) (2,065,029)
Sale (Purchase) of Treasury Stock (1,845,988) (648,000) (834,842)
Net Cash from Financing Activities (4,228,188) (4,801,230) (5,124,871)
Net Increase (Decrease) in Cash 181,238 65,680 372,597
Cash at Beginning of Period 2,607,749 2,542,069 2,169,472
Cash at End of Period $2,788,987 $ 2,607,749 $2,542,069
<PAGE>
<TABLE>
Net Income and Balance Sheet Information
(Dollars in Thousands)
<CAPTION>
First
Levy Farmers & National
First City County Industrial Second Gadsden Merchants Branford Havana Bank of
National National State National National National Bank of State State Jefferson
Bank Bank Bank Bank Bank Bank Trenton Bank Bank County
At December 31st:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year: 1993 $4,002 $590 $777 $784 $812 $271 $477 $364 $370 $259
Net Income 1992 3,680 674 881 872 858 206 411 310 364 218
1991 3,201 791 631 872 857 197 356 285 326 194
Loans,
Net of
Unearned
Interest 1993 177,409 38,771 43,366 29,415 29,560 21,558 19,498 13,288 16,290 10,269
1992 148,533 39,774 43,147 31,981 28,811 21,937 18,683 11,722 15,423 9,899
1991 145,062 42,022 41,540 32,072 28,305 22,441 17,096 9,930 16,254 10,052
Assets 1993 352,431 76,391 75,583 57,971 56,659 40,357 32,950 30,181 29,209 22,380
1992 291,849 73,065 77,283 58,649 50,923 43,041 31,848 23,300 30,239 21,108
1991 263,135 68,733 71,518 53,443 47,803 43,220 30,154 20,257 28,514 21,260
Noninterest
Bearing
Deposits 1993 104,481 19,114 9,782 13,084 18,641 4,416 4,836 5,049 4,407 3,906
1992 95,894 15,165 8,862 12,948 11,669 4,865 4,118 4,459 3,870 2,866
1991 75,649 15,132 7,275 9,133 10,632 4,017 2,930 3,662 3,667 2,472
Interest
Bearing
Deposits 1993 195,712 50,623 57,835 38,393 32,842 30,842 24,553 22,143 21,916 15,901
1992 151,683 50,424 60,705 39,413 34,432 33,128 24,430 16,066 23,532 15,813
1991 147,304 47,048 57,222 38,197 32,505 33,738 23,974 14,056 22,154 16,593
Shareholders'
Equity 1993 27,891 6,150 7,060 6,322 4,996 4,524 3,317 2,774 2,789 2,094
1992 25,890 5,860 6,783 6,088 4,684 4,403 3,091 2,509 2,645 1,935
1991 24,259 5,586 6,402 5,816 4,426 4,297 2,879 2,299 2,480 1,766
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
The Board of Directors has appointed Arthur Andersen & Co., independent
certified public accountants, as independent auditors for Capital City Bank
Group, Inc., and its subsidiaries for the current fiscal year ending December
31, 1994, subject to ratification by the shareholders. Fiscal 1994 will be the
first year Arthur Andersen & Co. will audit the books and records of the
Company. The decision to change the Company's independent auditors from James
D. A. Holley & Co. to Arthur Andersen & Co. was made by the Company's Board of
Directors on January 21, 1994. Arthur Andersen & Co. was engaged on April 5,
1994. During the periods in which James D. A. Holley & Co. audited the books
and records of the Company, none of the reports issued by such firm on the
financial statements of the Company contained an adverse opinion or disclaimer
of opinion, or was qualified or modified as to uncertainty, audit scope or
accounting principles. The Company has never had any disagreements with James
D. A. Holley & Co. on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference to the sections entitled "Election of
Directors" and "Executive Officers" in the Registrant's Proxy Statement dated
April 7, 1994, to be filed on or before April 7, 1994.
Item 11. Executive Compensation
Incorporated herein by reference to the section entitled "Executive
Compensation" in the Registrant's Proxy Statement dated April 7, 1994, to be
filed on or before April 7, 1994.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference to the subsection entitled "Information
Concerning Nominees" under the section entitled "Election of Directors", and
"Principal Shareholders" in the Registrant's Proxy Statement dated April 7,
1994, to be filed on or before April 7, 1994.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the subsection entitled "Compensation
Committee Interlocks and Insider Participation" under the section entitled
"Executive Compensation" in the Registrant's Proxy Statement dated April 7,
1994, to be filed on or before April 7, 1994.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
EXHIBITS
3(a) Articles of Incorporation, As Amended, of Capital City Bank Group, Inc.,
were filed as Exhibit 3(a) to the Registrant's Form S-14 filed on August 26,
1983 (File No. 2-86158), and are incorporated herein by reference.
3(b) Capital City Bank Group, Inc.'s By-Laws, As Amended are incorporated herein
by reference to Exhibit 3(b) of the Company's 1983 Form 10-K (File No. 2-86158).
<PAGE>
10(a) Reorganization Agreement and Plan of Merger among Capital City Bank Group,
Inc., Capital City First National Bank of Tallahassee, Capital City Second
National Bank, Industrial National Bank, City National Bank, Havana State Bank
and First National Bank of Jefferson County dated as of May 16, 1983, is
incorporated herein by reference to Registrant's Rule 424(b) Prospectus/Joint
Proxy Statement used in connection with Registration Statement No. 2-86158.
10(b) Master Note and Loan and Security Agreement evidencing a line of credit
between Registrant and The First National Bank of Atlanta, Georgia, (now
"Wachovia Bank of Georgia") dated December 22, 1989 is incorporated herein by
reference to Exhibit A in Registrant's Form 8-K dated December 19, 1989.
10(c) Amendment to Master Note and Loan and Security Agreement in item 10(b)
above, dated January 24, 1992, is incorporated herein by reference to Exhibit B
in Registrant's Form 10-K dated March 29, 1993.
10(d) Promissory Note and Pledge and Security Agreement evidencing a line of
credit between Registrant and Trust Company Bank, Atlanta, Georgia, dated
January 24, 1992, is incorporated herein by reference to Exhibit B in
Registrant's Form 10-K dated March 29, 1993.
16 Letter Regarding Change in Certifying Accountant
22 For a listing of Capital City Bank Group's subsidiaries see Item I
23 (a) Report of Independent Accountants
FINANCIAL STATEMENT SCHEDULES
Other schedules and exhibits are omitted because the required information either
is not applicable or is shown in the financial statements or the notes thereto.
REPORTS ON FORM 8-K
Capital City Bank Group, Inc. ("CCBG") filed no Form 8-K during the fourth
quarter of 1993.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on March
15, 1994, on its behalf by the undersigned, thereunto duly authorized.
CAPITAL CITY BANK GROUP, INC.
/s/ Godfrey Smith
President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 15, 1994, by the following persons in the
capacities indicated.
/s/ GODFREY SMITH
Godfrey Smith
President
(Principal Executive Officer)
/s/ J. KIMBROUGH DAVIS
J. Kimbrough Davis
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Directors:
/s/ DuBose Ausley
/s/ Thomas A. Barron
/s/ Payne H. Midyette, Jr.
/s/ Godfrey Smith
/s/ William G. Smith, Jr.
EXHIBIT 16
(Letterhead James D. A. Holley, Inc.)
March 25, 1994
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Gentlemen:
We hereby concur with the information included under the caption "Ratification
of Appointment of Independent Auditors" included in the Registrant's Proxy
Statement dated April 7, 1994.
/s/ JAMES D. A. HOLLEY & CO.
(Letterhead: James D. A. Holley, Inc.)
Exhibit 23a
Report of Independent Accountants
Shareholders and Board of Directors
Capital City Bank Group, Inc.
Tallahassee, Florida
We have audited the accompanying consolidated statements of condition of Capital
City Bank Group, Inc., and subsidiaries as of December 31, 1993 and 1992, and
the related statements of income, shareholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1993. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Capital City Bank
Group, Inc., as of December 31, 1993 and 1992, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the Financial Statements, Capital City Bank Group,
Inc., changed its method of accounting for income taxes in 1993.
/s/ JAMES D. A. HOLLEY & CO.
Tallahassee, Florida
February 4, 1994
