SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter: September 30, 1994 Commission File Number 0-13358 CAPITAL CITY BANK GROUP, INC. (Exact name of registrant as specified in its charter) Florida 59-2273542 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 217 North Monroe Street, Tallahassee, Florida 32301 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (904) 224-1171 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes __X___ No _____ At October 31, 1994, 2,845,815 shares of the Registrant's Common Stock, $.01 par value, were outstanding. CAPITAL CITY BANK GROUP, INC. I N D E X PART I. FINANCIAL INFORMATION PAGE NUMBER Consolidated Statements of Condition -- September 30, 1994 and December 31, 1993 3 Consolidated Statements of Income -- Three and Nine Months Ended September 30, 1994 4 and 1993 Consolidated Statements of Cash Flows -- Nine Months Ended September 30, 1994 and 1993 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Index to Exhibits 16 Signatures 16 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS CAPITAL CITY BANK GROUP, INC. CONSOLIDATED STATEMENTS OF CONDITION AS OF SEPTEMBER 30, 1994 AND DECEMBER 31, 1993 (Dollars In Thousands, Except Per Share Amounts) September 30, December 31, 1994 1993 (Unaudited) (Audited) ASSETS Cash & Due From Banks $ 58,473 $56,665 Interest Bearing Deposits at Banks - 1,257 Investment Securities, Market Value $203,933 and $221,274 as of September 30, 1994 and December 31, 1993, Respectively (Note 2) 207,085 218,623 Federal Funds Sold 36,650 55,970 Loans: (Note 3) 417,303 406,567 Unearned Interest (5,745) (7,143) Allowance for Loan Losses (7,799) (7,594) Loans, Net 403,759 391,830 Premises & Equipment 23,545 20,820 Accrued Interest Receivable 5,443 5,467 Intangible Assets 1,444 1,719 Other Assets 9,404 9,984 TOTAL ASSETS $745,803 $762,335 LIABILITIES Deposits: Noninterest Bearing Deposits $170,794 $171,985 Interest Bearing Deposits (Note 4) 480,374 490,760 Total Deposits 651,168 662,745 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 15,160 23,264 Other Short-Term Borrowings 1,000 1,202 Long-Term Debt 500 1,900 Other Liabilities 4,881 6,084 TOTAL LIABILITIES 672,709 695,195 SHAREHOLDERS' EQUITY Common Stock, $.01 Par Value; 4,000,000 shares authorized; 3,105,243 issued 31 31 Surplus 5,852 5,857 Unrealized Gains and Losses (584) - Retained Earnings 74,383 67,753 79,682 73,641 Treasury Stock: 259,428 shares at September 30, 1994 and 255,927 at December 31, 1993 (6,588) (6,501) TOTAL SHAREHOLDERS' EQUITY 73,094 67,140 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $745,803 $762,335 Book Value Per Share $ 25.68 $ 23.56 CAPITAL CITY BANK GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE PERIODS ENDED SEPTEMBER 30 (Unaudited) (Dollars in Thousands, Except Per Share Amounts)
THREE MONTHS ENDED SEPT. 30 NINE MONTHS ENDED SEPT. 30 1994 1993 1994 1993 INTEREST INCOME Interest and Fees on Loans $9,118 $8,698 $26,039 $25,089 Investment Securities: U. S. Treasury 1,376 1,362 3,931 4,242 U. S. Government Agencies/Corp. 419 398 1,406 1,207 States and Political Subdivisions 862 920 2,633 2,658 Other Securities 63 49 201 155 Interest on Deposits in Other Banks 1 27 17 80 Federal Funds Sold 396 377 1,199 1,361 Total Interest Income 12,235 11,831 35,426 34,792 INTEREST EXPENSE Deposits 3,500 3,514 10,154 10,793 Fed. Funds Purchased & Securities Sold Under Repurchase Agreements 168 120 451 379 Long-Term Borrowings 12 12 47 49 Other Short-Term Debt 8 6 22 18 Total Interest Expense 3,688 3,652 10,674 11,239 Net Interest Income 8,547 8,179 24,752 23,553 Provision for Loan Losses 304 185 963 670 Net Interest Income After Provision for Loan Losses 8,243 7,994 23,789 22,883 NONINTEREST INCOME Income from Fiduciary Activities 150 145 487 437 Service Charges on Deposit Accounts 1,346 1,370 4,014 4,181 Data Processing 582 529 1,890 1,801 Securities Transactions 3 14 7 20 Other 890 1,058 3,425 2,449 Total Noninterest Income 2,971 3,116 9,823 8,888 NONINTEREST EXPENSE Salaries and Employee Benefits 4,273 4,097 12,803 12,062 Occupancy, Net 619 576 1,737 1,591 Furniture and Equipment 718 731 2,096 2,142 Other 2,528 2,391 7,328 6,881 Total Noninterest Expense 8,138 7,795 23,964 22,676 Income Before Income Tax and Accounting Change 3,076 3,315 9,648 9,095 Income Tax Expense 870 931 2,705 2,497 Income Before Accounting Change 2,206 2,384 6,943 6,598 Cumulative Effect of a Change in Accounting Principle - 0 - (484) NET INCOME $2,206 $ 2,384 $ 6,943 $6,114 Net Income Per Share Before Accounting Change $ .78 $ 0.82 2.44 $ 2.26 Net Income Per Share $ .78 $ 0.82 2.44 $ 2.09 Cash Dividends Per Share $ - $ - .11 $ 0.10 Average Shares Outstanding 2,845,815 2,923,778 2,848,056 2,924,703
CAPITAL CITY BANK GROUP, INC. STATEMENT OF CASH FLOWS FOR THE PERIODS ENDED SEPTEMBER 30 (Dollars in Thousands) 1994 1993 (Unaudited) (Unaudited) NET INCOME $ 6,943 $ 6,114 Adjustments to Reconcile Net Income to Cash Provided by Operating Activities: Provision for Loan Losses 963 670 Depreciation 1,334 1,401 Amortization of Intangible Assets 275 211 Cumulative Effect of Accounting Change - 484 Net (Increase) Decrease in Interest Receivable 24 (218) Net (Increase) Decrease in Other Assets 575 (763) Net Increase (Decrease) in Other Liabilities 931 728 Net Cash From Operating Activities 11,045 8,627 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from Payments/Maturities of Investment Securities 70,092 61,122 Purchase of Investment Securities (59,139) (80,115) Net (Increase) Decrease in Loans (12,892) (7,193) Purchase of Premises & Equipment (4,143) (5,120) Sales of Premises & Equipment 85 6 Cash Acquired in Bank Acquisitions - 28,811 Net Cash from Investing Activities (5,997) (2,489) CASH FLOWS FROM FINANCING ACTIVITIES: Net Increase (Decrease) in Deposits (11,577) 2,267 Net Increase (Decrease) in Federal Funds Purchased (8,104) 9,887 Net Increase (Decrease) in Other Borrowed Funds (202) 212 Proceeds from Long-Term Debt - 200 Repayment of Long-Term Debt (1,400) (1,500) Dividends Paid (2,447) (2,282) Sale (Purchase) of Treasury Stock (87) (62) Net Cash From Financing Activities (23,817) 4,188 Net Increase (Decrease) in Cash and Cash Equivalents (18,769) 10,326 Cash and Cash Equivalents at Beginning of Period 113,892 107,271 Cash and Cash Equivalents at End of Period $ 95,123 $117,597 Supplemental Disclosure: Interest Paid $ 10,714 $ 11,062 Taxes Paid $ 2,659 $ 2,386 CAPITAL CITY BANK GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) MANAGEMENT'S OPINION AND ACCOUNTING POLICIES The consolidated financial statements, included herein, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Prior year financial statements have been reformatted and/or amounts reclassified, as necessary, to conform with the current year presentation. In the opinion of management, the consolidated financial statements contain all adjustments, which are those of a recurring nature, and disclosures necessary to present fairly the financial position of the Company as of September 30, 1994 and December 31, 1993, and the results of operations and cash flows for the three and nine month periods ended September 30, 1994 and 1993. The Company and its subsidiaries follow generally accepted accounting principles and reporting practices applicable to the banking industry. The principles which materially affect the financial position, results of operations and cash flows are set forth in Notes to Financial Statements which are included in the Company's 1993 Annual Report and Form 10K. (2) INVESTMENT SECURITIES 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 were as follows: Amortized Cost U. S. Treasury $31,364,293 U. S. Government Agencies and Corporations 6,246,822 States & Political Subdivisions 20,853,825 Mortgage Backed Securities 3,842,192 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. At the time the new accounting standard was adopted the Company recorded an unrealized gain, net of deferred taxes, of $847,000. As a result of rising interest rates, the Company had a net unrealized loss of $584,000 at September 30, 1994. Prior to 1994, all securities were held for investment and carried at amortized cost. It is not management's intention nor practice to participate in the trading of securities and sales of securities have been minimal. With the recent change in accounting standards, management believes it is prudent to transfer a portion of its investment portfolio to the available-for-sale category in order to properly manage its liquidity position and interest rate risk. Securities in the available-for-sale portfolio will be recorded at fair value while securities in the held-to-maturity portfolio will continue to be carried at amortized cost. The carrying value and related market value of investment securities in the held-to-maturity and available-for-sale portfolios at September 30, 1994 and the held-for-investment portfolio at December 31, 1993 were as follows (dollars in thousands): September 30, 1994 Amortized Unrealized Unrealized Market Held-To-Maturity Cost Gains Losses Value U. S. Treasury $ 75,399 $ 6 $ 1,083 $ 74,322 U. S. Government Agencies and Corporations 24,038 16 942 23,112 States and Political Subdivisions 50,705 299 1,286 49,718 Mortgage Backed Securities 3,161 1 138 3,024 Other Securities 2,789 - 25 2,764 Total $156,092 $ 322 $3,474 $152,940 September 30, 1994 Amortized Unrealized Unrealized Market Available-For-Sale Cost Gains Losses Value U. S. Treasury $18,019 $ 6 $ 210 $17,815 U. S. Government Agencies and Corporations 7,046 15 350 6,711 States and Political Subdivisions 21,941 184 566 21,559 Mortgage Backed Securities 3,014 9 7 3,016 Other Securities 1,889 3 - 1,892 Total $51,909 $ 217 $ 1,133 $50,993 December 31, 1993 Amortized Unrealized Unrealized Market Held-For-Investment Cost Gains Losses Value U. S. Treasury $111,233 $ 578 $ 88 $111,723 U. S. Government Agencies and Corporations 26,811 185 76 26,920 States and Political Subdivisions 67,070 1,991 112 68,949 Mortgage Backed Securities 8,504 135 6 8,633 Other Securities 5,005 48 4 5,049 Total $218,623 $ 2,937 $ 286 $221,274 (3) LOANS The composition of the Company's loan portfolio at September 30, 1994 and December 31, 1993 was as follows (dollars in thousands): September 30, 1994 December 31, 1993 Commercial, Financial and Agricultural $ 38,721 $ 46,963 Real Estate-Construction 22,859 22,968 Real Estate-Mortgage 254,335 242,741 Consumer 101,388 93,895 Gross Loans $417,303 $406,567 (4) DEPOSITS The composition of the Company's interest bearing deposits at September 30, 1994 and December 31, 1993 was as follows (dollars in thousands): September 30, 1994 December 31, 1993 NOW Accounts $ 94,805 $100,184 Money Market Accounts 73,618 77,302 Savings Deposit 105,525 110,128 Other Time Deposits 206,426 203,146 Total Interest Bearing Deposits $480,374 $490,760 ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion sets forth the major factors that have affected the Company's financial condition and results of operations and should be read in conjunction with the accompanying financial statements. The year-to- date averages used in this report are based on daily balances for each respective period. RESULTS OF OPERATIONS Net Income Net income was $2.2 million, or $.78 per share, for the third quarter of 1994, a 4.9% decrease on a per share basis over the comparable period for 1993. Net income was $6.9 million, or $2.44 per share, for the nine months ended September 30, 1994, a 16.7% increase on a per share basis over the comparable period in 1993. Earnings for the first nine months of 1993 included a one-time, non-cash charge of $484,000, or $.17 per share, attributable to the adoption of Financial Accounting Standards Statement No. 109. Other factors which impacted earnings include a higher net interest margin, gains on the sale of real estate and higher noninterest expense. Condensed statements of income for the respective periods are presented below: For The Three For The Nine Months Ended Months Ended September 30, September 30, 1994 1993 1994 1993 Interest and Dividend Income $12,235 $11,831 $35,426 $34,792 Taxable Equivalent Adjustment(1) 403 427 1,256 1,254 12,638 12,258 36,682 36,046 Interest Expense 3,688 3,652 10,674 11,239 Net Interest Income (FTE) 8,950 8,606 26,008 24,807 Provision for Loan Losses 304 185 963 670 Taxable Equivalent Adjustment 403 427 1,256 1,254 Net Int. Inc. After Provision 8,243 7,994 23,789 22,883 Noninterest Income 2,971 3,116 9,823 8,888 Noninterest Expense 8,138 7,795 23,964 22,676 Income Before Income Taxes and Cumulative Effect of a Change in Accounting Principle 3,076 3,315 9,648 9,095 Income Taxes 870 931 2,705 2,497 Income Before Change in Accounting Principle 2,206 2,384 6,943 6,598 Cumulative Effect of a Change in Accounting Principle - - - (484) Net Income $2,206 $2,384 $6,943 $6,114 Percent Change Before Cumulative Adjustment (7.47%) 7.48% 5.23% 3.34% After Cumulative Adjustment (7.47%) 7.48% 13.56% (4.24%) Return on Average Assets (2) Before Cumulative Adjustment 1.17% 1.31% 1.24% 1.24% After Cumulative Adjustment 1.17% 1.31% 1.24% 1.15% Return on Average Equity (2) Before Cumulative Adjustment 12.29% 14.05% 13.30% 13.47% After Cumulative Adjustment 12.29% 14.05% 13.30% 12.48% (1) Computed using a statutory tax rate of 34% (2) Annualized Net Interest Income Third quarter taxable equivalent net interest income increased $344,000, or 4.0% over the same period for 1993. Through September 30, 1994, taxable equivalent net interest income increased $1,201,000, or 4.8%, over the same period for 1993. The increase in each respective period is attributable to the growth in earning assets and improvement in the net interest margin. Table I on page 14 provides a comparative analysis of the Company's average balances and interest rates. As compared to the prior year, taxable-equivalent interest income increased $380,000, or 3.1% and $636,000, or 1.8%, respectively, for the three and nine month periods ended September 30, 1994. This increase is attributable to loan growth. Average loans for the first nine months of 1994 increased $25.4 million, or 6.7%, as compared to the same period in 1993. This growth in loans equalled the total growth in average earning assets of $25.4 million, or 3.9%. Although interest rates have increased significantly during 1994, i.e., the prime rate has risen 175 basis points from 6.00% to 7.75%, overall portfolio yields are still slightly below their 1993 levels. The average yield on earning assets during the first nine months on 1994 was 7.34% compared to 7.50% in 1993. Interest expense increased $36,000, or 1.0%, in the third quarter and decreased $565,000, or 5.0% for the first nine months, as compared to the comparable periods in 1993. Although interest rates have increased sharply during 1994, growth in transaction accounts, primarily noninterest bearing and N.O.W. accounts, enabled management to maintain a lower cost of funds as compared to the comparable nine-month period in 1993. During the third quarter, however, the mix of deposits began to shift into higher cost certificates of deposit as noninterest bearing, N.O.W. account and savings balances declined. Although still slightly below 1993 levels, the shift in deposits coupled with higher interest rates increased the average rate paid on interest bearing liabilities eleven basis points over the second quarter of 1994, from 2.73% to 2.84%. If interest rates remain at their current level or higher, management anticipates this shift in mix will continue and the general repricing of deposits will result in a higher cost of funds in the fourth quarter. The Company's interest rate spread (defined as the average taxable equivalent yield on earning assets less the average rate paid on interest bearing liabilities) increased from 4.47% in the first nine months of 1993 to 4.57% in 1994. The Company's net interest margin percentage (defined as taxable-equivalent net interest income divided by average earning assets) increased from 5.16% in the first nine months of 1993 to 5.20% in 1994. Provisions for Loan Losses The provision for loan losses was $304,000 and $963,000, respectively, for the three and nine month periods ended September 30, 1994, compared to $185,000 and $670,000 for the comparable periods in 1993. Loan growth and slightly higher net charge-offs contributed to the increase in the loan loss provision. Charge-offs through the first nine months of 1994 totalled $758,000 of which $435,000 is attributable to one credit. At September 30, 1994, the allowance for loan losses was $7.8 million, or 1.89%, of total loans compared to $7.6 million, or 1.90%, at December 31, 1993. Charge-off activity for the respective periods is set forth below. Three Months Ended Nine Months Ended 9/30/94 9/30/93 9/30/94 9/30/93 Net Charge-Offs $ 66,000 $293,000 $758,000 $734,000 Net Charge-Offs (Annualized) as a percent of Average Loans Outstanding, Net of Unearned Interest .06% .30% .25% .26% Noninterest Income Relative to the comparable periods in 1993, noninterest income decreased $145,000, or 4.7%, in the third quarter and increased $935,000, or 10.5%, through the first nine months of 1994. As discussed below, the decrease in the third quarter reflects lower mortgage origination fees. A majority of the year-to-date increase is attributable to gains on the sale of real estate (recognized during the first and second quarter) and credit card merchant fees. During the first nine months of 1994, the Company recognized gains, including gains from the sale of OREO and bank premises, totalling $627,000, which represented a $408,000 increase over the first nine months of 1993. Credit card merchant fees were up $447,000, or 55.9%, primarily reflecting an increase in the number of accounts and higher volume. However, the increase is partially offset by a $304,000, or 91.8%, increase in credit card processing expense which is recorded in "Other" noninterest expense. Mortgage origination volume declined significantly during the second and third quarter of 1994. Through the first nine months of 1994 mortgage volume totalled $29.1 million ($15.3 million closed in the first quarter) versus $35.9 million for the comparable period in 1993. Reflecting the lower volume, mortgage fees have declined $121,000, or 18.5%, through the first nine months of 1994 as compared to the comparable period in 1993. Service charges on deposit accounts declined $24,000, or 1.8%, and $167,000, or 4.0%, over the comparable three and nine month periods for 1993. The decline in service charge income reflects a decrease in number of accounts, primarily transaction accounts, and a lower level of activity subject to service charge assessments. Noninterest income as a percent of average earning assets was 1.96% for the first nine months of 1994 versus 1.85% for the comparable quarter in 1993 due primarily to the nonrecurring gains which were recognized in 1994. Noninterest Expense Noninterest expense increased $343,000, or 4.4%, and $1.3 million, or 5.7%, respectively, over the comparable three and nine month periods in 1993. Through the first nine months, compensation expense increased $741,000, or 6.1%, partially attributable to personnel expense associated with additional branch locations and higher pension expense. During the fourth quarter of 1993, the pension plan's rate assumptions were revised to reflect the lower level of interest rates. The revisions in assumptions contributed to the overall increase in pension expense which is up $165,000, or 32.9%, through the first nine months. Occupancy expense (including premises, furniture, fixtures and equipment) increased $43,000, or 7.5%, in the third quarter and $146,000, or 9.2%, through the first nine months. Increases associated with additional branch facilities were partially offset by a reduction in depreciation expense as certain pieces of data processing equipment have become fully depreciated. With the recent renovation of Capital City First National's main facility and purchase of an operations center which was placed into service in August 1994, management is projecting that occupancy expense will continue to increase during the fourth quarter of 1994. Other noninterest expense increased $137,000, or 5.7%, in the third quarter and $447,000, or 6.5% through the first nine months. A significant portion of the increase is attributable to commission and service fees which were up $359,000, or 45.3%, due primarily to an increase in credit card processing fees of $304,000, or 91.8%. Additionally, the Company incurred approximately $86,000 in non-recurring expense items during the first and second quarters associated with the conversion of credit card processing. The addition of four branch offices during 1993 and 1994 has also increased the expense level for items such as telephone, deposit insurance and the amortization of intangible assets. During the first quarter of 1995, the Company plans to complete its corporate reorganization in which seven of its ten affiliate banks will be merged into one state bank affiliate. The resulting bank will constitute approximately 80% of the Company's total assets. Management anticipates the Company will incur some additional expense during the fourth quarter of 1994 associated with this corporate reorganization. Annualized net noninterest expense (noninterest income minus noninterest expense) as a percent of average earning assets was 2.83% in the first nine months of 1994 versus 2.87% for the first nine months of 1993. Real estate gains recognized in the first and second quarter of 1994 have enabled the Company to maintain the net noninterest expense ratio at a level below that of last year. Income Taxes The provision for income taxes decresed $61,000, or 6.6%, during the third quarter and increased $208,000, or 8.3 %, during the first nine months of 1994. Third quarter taxable income declined resulting in a lower tax provision for the quarter. Higher taxable income during the first and second quarter, however, contributed to the overall increase in the tax provision through the first nine months. The Company's effective tax rate for the first nine months of 1994 was 28.0% compared to 27.5% for the same period in 1993. The higher effective rate is primarily attributable to the level of tax-exempt interest, which has declined as a percent of operating profits, and recent tax law changes impacting the deductibility of certain expenses, including meals and entertainment, club dues and association dues. During the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which changed the accounting for income taxes to the "liability" method from the "deferral" method previously required by Accounting Principals Board Opinion No. 11. A tax expense of $484,000 resulting from the cumulative effect of adopting this new standard is included in net income for the first nine months of 1993. FINANCIAL CONDITION For the first nine months of 1994, the Company's assets averaged $745.7 million compared to $712.5 million in 1993. During this same nine month period, earning assets averaged $668.7 million versus $643.4 million in 1993. The most significant event during 1994 has been the growth in the loan portfolio. On average, loans increased $25.4 million, or 6.7% over 1993. The loan portfolio as a percent of average earning assets is 60.1% versus 58.5% in 1993. This loan growth has had a very positive impact on the Company's net interest income during 1994. U.S. Government securities increased $8.3 million, or 6.0%, while municipal securities increased $7.7 million, or 11.9%. The increase in the investment portfolios reflects management's decision to take advantage of the higher interest rates and reduce the Company's position in federal funds sold, which decreased $19.5 million, or 31.5%. Growth in earning assets has been funded through both internal deposit generation and branch acquisitions. Table I on page 15, presents average balances for the three and nine month periods of 1994 and 1993. During the first quarter of 1994, the Company adopted Statement of Financial Accounting Standards No. 115 ("Accounting for Certain Investments in Debt and Equity Securities"). To afford greater flexibility in managing the portfolio, management transferred approximately 30% of the portfolio to the "Available-for-Sale" category. The available-for-sale securities portfolio will enable the Company to better manage its liquidity position and interest rate risk without adversely affecting the classification of securities in the "Held-to-Maturity" portfolio, which are recorded at amortized costs. Securities in the available-for-sale portfolio are recorded at fair value with unrealized gains and losses, net of deferred taxes, reported as a separate component of equity capital. See Note 2 in Notes to Consolidated Financial Statements for further discussion. At September 30, 1994, the Company's nonperforming loans, which include nonaccruing and restructured, were $6.9 million versus $9.4 million at year- end and $10.6 million at September 30, 1993. As a percent of nonperforming loans, the allowance for loan losses represented 113.6% at September 30, 1994 versus 80.6% at December 31, 1993 and 70.9% at September 30, 1993. Other real estate, which includes property acquired either through foreclosure or by receiving a deed in lieu of foreclosure, was $1.8 million at September 30, 1994, versus $3.5 million at December 31, 1993, and $3.0 million at September 30, 1993. Total nonperforming assets have been reduced by $4.9 million, or 36.2% since September 30, 1993. Average deposits increased from $623.0 million for the first nine months of 1993, to $650.0 million for the first nine months of 1994. Relative to the first nine months of 1993, the most significant deposit growth has been in the categories of noninterest bearing and NOW accounts. Average noninterest bearing deposits have increased $9.6 million, or 6.7%, and NOW accounts have increased $17.7 million, or 23.3%. The lower interest rate environment in recent years has reduced the incentive for depositors to invest in longer term, fixed rate deposits, thereby leaving higher balances in transaction accounts. As interest rates rose during the second and third quarter, the Company experienced growth in its certificates of deposit reflecting the more attractive rates. The ratio of average noninterest bearing deposits to total deposits was 23.7% for the first nine months of 1994 compared to 23.2% for the first nine months of 1993. For the same periods, the ratio of average interest bearing liabilities to average earning assets was 77.2% and 77.4%, respectively. LIQUIDITY AND CAPITAL RESOURCES Liquidity, for a financial institution, is the availability of funds to meet increased loan demand and/or excessive deposit withdrawals. Management has implemented a financial structure that provides 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 for the subsidiary banks include federal funds sold, near- term loan and investment maturities, including the "Available for Sale" investment portfolio, and the ability to purchase federal funds through established lines of credit with correspondent banks. Additionally, the parent company maintains two $6.0 million revolving lines of credit. As of September 30, 1994, there was $500,000 drawn under the two facilities, leaving available credit of $11.5 million. The Company's equity capital was $73.1 million as of September 30, 1994 compared to $67.1 million as of December 31, 1993. The Company's management continues to monitor its capital position in relation to its level of assets with the objective of maintaining a strong capital position. The leverage ratio was 9.6% at September 30, 1994 versus 8.6% at December 31, 1993. Further, the Company's risk-adjusted capital ratio of 17.15% significantly exceeds the 8.0% minimum requirement under the risk-based regulatory guidelines. State and federal regulations as well as the Company's long-term debt agreements place certain restrictive covenants on both the Company and its Group banks. At September 30, 1994, these regulations and covenants did not impair the Company's (or its Group banks') ability to declare and pay dividends or to meet other existing obligations. During the first nine months of 1994, shareholders' equity increased $6.0 million, or 11.9%, on an annualized basis. At September 30, 1994, the Company's common stock had a book value of $25.68 per share compared to $23.56 at December 31, 1993. Pursuant to the Company's stock repurchase program adopted in 1989, the Company has repurchased 259,428 shares of its common stock, net of shares subsequently reissued. In the first nine months of 1994, 5,819 shares were repurchased and 2,318 treasury shares were reissued as performance awards in accordance with the Company's Stock Incentive Plan. TABLE I AVERAGES BALANCES & INTEREST RATES (Taxable Equivalent Basis - Dollars in Thousands)
FOR THREE MONTHS ENDED SEPTEMBER 30 FOR NINE MONTHS ENDED SEPTEMBER 30 1994 1993 1994 1993 Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate ASSETS Loans, Net of Unearned Interest $410,819 $ 9,124 8.81% $387,614 $8,705 8.91% $401,965 $ 26,055 8.67% $376,595 $25,107 8.91% Taxable Investment Securities 152,105 1,859 4.95% 139,314 1,809 5.26% 151,691 5,539 4.93% 138,310 5,604 5.48% Tax-Exempt Investment Securities 71,908 1,259 7.00% 69,919 1,339 7.66% 72,327 3,873 7.14% 64,656 3,892 8.03% Funds Sold 35,555 396 4.42% 51,961 405 3.09% 42,757 1,215 3.80% 63,793 1,442 3.02% Total Earning Assets 670,387 12,638 7.51% 648,808 12,258 7.53% 668,740 36,682 7.34% 643,354 36,045 7.50% Cash & Due From Banks 43,013 44,715 46,223 44,752 Allowance for Loan Losses (7,665) (7,678) (7,744) (7,654) Other Assets 39,233 34,252 38,475 32,055 TOTAL ASSETS $744,968 $720,097 $745,694 $712,507 LIABILITIES NOW Accounts $ 90,081 $483 2.13% $ 76,727 $ 391 2.02% $ 94,012 $ 1,341 1.93% $ 76,267 $ 1,196 2.12% Money Market Accounts 75,374 431 2.27% 82,575 455 2.19% 76,972 1,220 2.14% 79,584 1,367 2.32% Savings Accounts 107,151 652 2.42% 112,589 704 2.48% 109,527 1,971 2.41% 114,614 2,281 2.66% Other Time Deposits 222,838 1,933 3.44% 209,403 1,964 3.72% 215,500 5,622 3.49% 208,175 5,949 3.82% Total Int. Bearing Deposits 495,444 3,499 2.80% 481,294 3,514 2.90% 496,011 10,154 2.74% 478,640 10,793 3.02% Funds Purchased 17,175 168 3.88% 18,188 120 2.62% 17,925 451 3.36% 16,294 379 3.11% Other Borrowed Funds 872 9 3.88% 1,013 6 2.40% 947 22 3.17% 1,131 18 2.18% Long-Term Debt 889 12 5.30% 1,184 12 4.05% 1,378 47 4.53% 1,602 49 4.08% Total Interest Bearing Liabilities 514,380 3,688 2.84% 501,679 3,652 2.89% 516,261 10,674 2.77% 497,667 11,239 3.03% Noninterest Bearing Deposits 153,301 146,362 154,024 144,389 Other Liabilities 6,083 4,718 5,601 4,954 TOTAL LIABILITIES 673,764 652,759 675,886 647,010 SHAREHOLDERS' EQUITY Common Stock 31 31 31 31 Surplus 5,852 5,857 5,853 5,857 Retained Earnings 65,321 61,450 63,924 59,609 TOTAL S'HOLDERS' EQUITY 71,204 67,338 69,808 65,497 TOTAL LIAB. & EQUITY $744,968 $720,097 $745,694 $712,507 Interest Rate Spread 4.67% 4.64% 4.57% 4.47% Net interest Income $8,950 $8,606 $26,008 $24,807 Net Interest Margin 5.33% 5.29% 5.20% 5.16% (1) Average balances include nonaccrual loans. Interest income includes fees on loans of approximately $477,000 and $1,266,000, for the nine months ended September 30, 1994 and $510,000 and $1,214,000, for the three and nine month periods ended September 30, 1993.
PART II. OTHER INFORMATION Items 1-5. Not applicable Item 6. Exhibits and Reports on Form 8-K (A) Exhibits EX-27 Financial Data Schedule (B) Reports on Form 8-K The Company did not file any reports on Form 8-K during the period ended September 30, 1994. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned Chief Financial Officer hereunto duly authorized. CAPITAL CITY BANK GROUP, INC. (Registrant) By:___________________________ J. Kimbrough Davis Senior Vice President and Chief Financial Officer Date: November 10, 1994