1994 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 1934
For the Fiscal Year Ended December 31, 1994
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) 671-0610
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock - $.01 par value
As of March 1, 1995, Capital City Bank Group, Inc. had 3,105,243 shares of
common stock issued and 2,853,680 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, 1995, was approximately $35,839,317.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report to shareholders for the fiscal
year ended December 31, 1994 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.
CAPITAL CITY BANK GROUP, INC.
ANNUAL REPORT FOR 1994 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 11
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 11
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8. Financial Statements and Supplementary Data 41
Item 9. Changes in and Disagreement with Accountants on Accounting
and Financial Disclosure 65
PART III
Item 10. Directors and Executive Officers of the Registrant 65
Item 11. Executive Compensation 65
Item 12. Security Ownership of Certain Beneficial Owners and
Management 65
Item 13. Certain Relationships and Related Transactions 65
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 65
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 1994, CCBG owned ten banks with a total of twenty nine offices in
seven counties, four counties in North-Central Florida and three counties in
North Florida. On January 1, 1995, the Company merged seven of its ten
separately chartered banks into a state-chartered bank headquartered in
Tallahassee, Florida. The reorganization consisted of merging Capital City
First National Bank, Capital City Second National Bank, Industrial National
Bank, City National Bank, First National Bank of Jefferson County and Gadsden
National Bank into Havana State Bank and changing the name and headquarters from
Havana State Bank, Havana, Florida to Capital City Bank, Tallahassee, Florida.
This restructuring allows 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. Additionally, as part of the reorganization,
the Company formed three separate subsidiaries, Capital City Trust Company,
Capital City Mortgage Company and Capital City Services Company, which are
wholly-owned subsidiaries of Capital City Bank.
As of January 1, 1995, Capital City Bank had assets totalling $611.9 million,
which constituted approximately 82% of the Company's total consolidated assets.
On a proforma basis, Capital City Bank earned $7.3 million for the year ended
December 31, 1994 which represented approximately 83% of the Company's
consolidated earnings. See page 63 for net income and balance sheet information
on each of the Group banks.
Capital City Bank Group, Inc., and Capital City Bank 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.
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.
Five Year
Date Date Acquired Deposits as of Compound Deposit
Chartered by CCBG December 31, 1994 Growth Rate
Capital City Bank January 1, 1995 * $536,440,741** 4.3%**
Tallahassee, Florida
Levy County State Bank September 18, 1948 January 1, 1985 63,087,345 (.8%)
Chiefland, Florida
Farmers & Merchants October 18, 1911 February 1, 1986 29,652,206 1.7%
Bank of Trenton
Trenton, Florida
Branford State Bank March 13, 1911 July 31, 1989 25,637,119 10.8%
Branford, Florida
*Capital City Bank was formed through the merger of First National Bank, Second National Bank, Industrial
National Bank, City National Bank, Havana State Bank, First National Bank of Jefferson County and Gadsden
National Bank, which were separately chartered, wholly-owned subsidiaries of Capital City Bank Group,
Inc., prior to the merger.
**On a proforma basis
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 12 in the Notes to Financial Statements
for additional information.
The Company had a total of 489 (full-time equivalent) employees at March 1,
1995. In management's opinion, the Company enjoys a satisfactory relationship
with its employees. Pages 11-41 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, 1995, Capital City Bank provided
correspondent services to 26 financial institutions (including the Group banks
listed previously) located throughout North Florida and South Georgia. Capital
City Bank's data processing center provides computer services to 14 of the 26
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
Capital City Trust Company 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 in pension and profit
sharing plans. The current market value of trust assets totalled $406.5 million
at December 31, 1994, of which $103.4 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. Capital City Bank's Leon County deposits
totalled $469.1 million, or 72.4%, of the Company's consolidated
deposits at December 31, 1994.
Based on information developed as of September 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 September 30 (1)
1994 1993 1992
Capital City Bank:
Citrus County 3.6% 3.4% -
Gadsden County 30.4% 32.3% 31.8%
Jefferson County 27.6% 28.2% 27.1%
Leon County 24.0% 23.4% 26.9%
Levy County State Bank 33.8% 34.3% 33.9%
Farmers & Merchants Bank of Trenton 55.4% 56.0% 56.2%
Branford State Bank 14.5% 14.8% 12.3%
(1) Obtained from the September 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 September 30, 1994.
Number of Number of Commercial
County Commercial Banks Bank Offices
Citrus 10 32
Gadsden 5 10
Gilchrist 2 4
Jefferson 2 2
Leon 14 56
Levy 3 12
Suwannee 4 6
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 "Federal Reserve") under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"). In addition to the Federal Reserve, the Company's four
state bank subsidiaries, trust company subsidiary and mortgage banking
subsidiary, all chartered under Florida law, are subject to regulation,
supervision and examination by the Comptroller of the State of Florida (the
"Florida Comptroller") and, with respect to the bank subsidiaries, the Federal
Deposit Insurance Corporation (the "FDIC").
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 was recently amended in September 1994 by the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act").
The Interstate Banking Act provides that, effective September 29, 1995,
adequately capitalized and managed bank holding companies will be permitted to
acquire banks in any state. State laws prohibiting interstate banking or
discriminating against out-of-state banks will be preempted as of the effective
date. States cannot enact laws opting out of this provision; however, states
may adopt a minimum age restriction requiring that target banks located within
the state be in existence for a period of years, up to a maximum of five years,
before such bank may be subject to the Interstate Banking Act. The Interstate
Banking Act establishes deposit caps which prohibit acquisitions that would
result in the acquiring company controlling 30 percent or more of the deposits
of insured banks and thrift institutions held in the state in which the target
maintains a branch or 10 percent or more of the deposits nationwide. States
will have the authority to waive the 30 percent deposit cap. State-level
deposit caps are not preempted as long as they do not discriminate against out-
of-state companies, and the federal deposit caps apply only to initial entry
acquisitions.
In addition, the Interstate Banking Act provides that as of June 1, 1997,
adequately capitalized and managed banks will be able to engage in interstate
branching by merging banks in different states. States may enact legislation
authorizing interstate mergers earlier than June 1, 1997, or, unlike the
interstate banking provision discussed above, states may opt out of the
application of the interstate merger provision by enacting specific legislation
before June 1, 1997.
The Interstate Banking Act also expands current exemptions from the requirement
that banks be examined on a 12-month cycle. Exempted banks will be examined
every 18 months. Other provisions of the Interstate Banking Act address paper
work reduction and regulatory improvements, small business and commercial real
estate loan securitization, truth-in-lending amendments on high cost mortgages,
strengthening of the independence of certain financial regulatory agencies,
money laundering, flood insurance reform and extension of certain statutes of
limitation.
Florida recently enacted the Florida Reciprocal Banking Act (the "Florida Act")
which takes effect on May 1, 1995. Under the Florida Act, only banks that have
been in existence for two years or more may be acquired by out-of-state bank
holding companies pursuant to the Interstate Banking Act. Under current law,
Florida expressly prohibits interstate branching. The Interstate Banking Act
will supersede this prohibition, however, unless Florida, prior to June 1, 1997,
expressly enacts legislation opting out of the interstate banking provisions of
the Interstate Banking Act.
At this time, the Company is unable to predict how the Interstate Banking Act
and the Florida Act may affect its operations.
In addition to the BHC Act, the Federal Reserve Act imposes various limitations
on the extent to which the Company's subsidiary banks can finance or otherwise
supply funds to the Company 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 percent of
its capital stock and surplus to any one affiliate, but may not lend, in the
aggregate, more than 20 percent 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 12 in the Notes to Financial Statements for
further information.
The passage and periodic phasing in of other congressional acts has also
significantly affected the Company and the Group banks, and the competitive
environment in which they operate. On December 31, 1992, the Federal banking
regulatory authorities implemented risk-based capital requirements, and the
Company and the Group banks must comply with these requirements. Any
institution which fails to meet minimum capital requirements may be subject to
corrective action by the Federal banking regulatory authorities. Under the
capital guidelines adopted by these banking regulators, the Company's capital
level exceeds the minimum requirements as of December 31, 1994. See the
information set forth under the heading "Liquidity and Capital Resources" in the
section of this report entitled "Financial Review".
In 1993, the Federal Deposit Insurance Act was amended to allow claims by
depositors against an institution which is being liquidated or otherwise
dissolved to have priority over the claims of the institution's shareholders and
other senior or general creditors. For purposes of this statutory provision,
the priority for depositors also includes the FDIC.
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
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 Federal Reserve, the Florida Comptroller 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 a risk-based system. 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.
Although there are proposals currently under consideration for reducing BIF
premiums, under current regulations, a financial institution's deposit insurance
assessment will be within a range of 0.23 percent to 0.31 percent of its
qualifying deposits, depending on the institutions risk classification. Based
on notices from the regulators in late 1994, in the first half of 1995 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, 1993 and 1994.
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 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
permits direct mergers between bank and thrift institutions.
Operational Standards - Pursuant to FDICIA, the federal banking agencies adopted
real estate lending guidelines which set loan-to-value ("LTV") ratios for
different types of real estate loans. An 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 is combined with the amount of all senior liens when
calculating the ratio. In addition to establishing the LTV 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 Federal Reserve
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 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 consumer 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.
The Interstate Banking Act, however, modifies certain controversial provisions
of FDICIA. Specifically, the Interstate Banking Act modifies the safety and
soundness provisions contained in Section 39 of FDICIA which required the
federal banking agencies to write regulations governing such topics as internal
loan controls, loan documentation, credit underwriting, interest rate exposure,
asset growth, compensation and fees and whatever else the agencies determined to
be appropriate. The Interstate Banking Act exempts bank holding companies from
these provisions and requires the federal banking agencies to write guidelines,
as opposed to regulations, dealing with these areas. The federal banking
agencies are also given more discretion with regard to prescribing standards for
banks' asset quality, earnings and stock evaluation.
Another regulation to which the Company and its banking subsidiaries are subject
is the Community Reinvestment Act of 1977 ("CRA"). This requires each federal
banking agency 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
state bank, the Federal Reserve or the FDIC 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, 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 borrowing, the Board of
Governors of the Federal Reserve 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, 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 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 the Company may be affected thereby.
Item 2. Properties
Capital City Bank Group, Inc., is headquartered in Tallahassee, Florida. The
Company's offices are in the Capital City Bank building located on the corner of
Tennessee and Monroe Streets in downtown Tallahassee. The building is owned by
Capital City Bank but is located, in part, on land leased under a long-term
agreement.
Capital City Bank's Parkway Office is located on land leased from the Smith
Interests General Partnership in which several directors and officers have an
interest. Lease payments during 1994 totalled approximately $53,000
As of March 1, 1995 the Company had 29 banking locations. Of the 29 locations,
the Company leases either the land or buildings (or both) at 7 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 $30.00 per share for the two-year
period ended December 31, 1994, with the most recent trades at $30.00 per share.
Item 6. Selected Financial And Other Data
For the Years Ended December 31,
1994 1993 1992 1991 1990
(Dollars in Thousands, Except Per Share Data)
Interest Income $ 47,891 $ 46,395 $ 48,306 $ 54,801 $ 58,527
Net Interest Income 33,166 31,555 29,775 28,195 27,851
Provision for Loan Losses 1,246 960 1,216 1,817 3,342
Income Before Accounting
Change 8,825 8,728 8,376 7,272 6,590
Net Income 8,825 8,244 8,376 7,272 6,590
Per Common Share:
Income Before
Accounting Changes $ 3.10 $ 2.99 $ 2.86 $ 2.46 $ 2.16
Net Income 3.10 2.82 2.86 2.46 2.16
Cash Dividends Declared .91 .83 .78 .73 .69
Book Value 25.44 23.56 21.59 19.55 17.89
Based on Net Income:
Return on Average Assets
Before Accounting Change 1.18% 1.21% 1.27% 1.15% 1.05%
Return on Average Assets 1.18 1.14 1.27 1.15 1.05
Return on Average Equity
Before Accounting Change 12.51 13.15 13.71 13.07 12.25
Return on Average Equity 12.51 12.43 13.71 13.07 12.25
Dividend Payout Ratio 29.34 29.44 27.25 29.65 31.50
Averages for the Year:
Loans, Net of Unearned
Interest $406,873 $381,807 $358,876 $368,555 $378,405
Earning Assets 666,919 651,042 598,127 571,165 561,741
Assets 745,334 722,286 662,150 633,963 624,732
Deposits 647,254 630,324 573,162 546,291 537,774
Long-Term Debt 1,144 1,381 3,156 5,555 5,703
Shareholders' Equity 70,563 66,328 61,078 55,635 53,791
Year-End Balances:
Loans, Net of Unearned
Interest $420,804 $399,424 $369,911 $364,773 $380,127
Earning Assets 645,832 675,273 619,929 568,720 555,237
Assets 742,630 762,335 686,966 639,540 643,968
Deposits 648,174 662,745 597,497 555,092 550,336
Long-Term Debt - 1,900 2,000 4,000 6,225
Shareholders' Equity 72,400 67,140 63,169 57,723 53,444
Equity to Assets Ratio 9.75% 8.81% 9.20% 9.03% 8.30%
Other Data:
Average Shares
Outstanding 2,847,492 2,924,022 2,932,123 2,958,920 3,049,992
Shareholders of Record* 761 754 748 731 727
Banking Locations* 29 30 27 27 26
Full-Time Equivalent
Employees* 489 476 466 469 489
*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 1994 compares with prior years. Throughout this
section, Capital City Bank Group, Inc., and its subsidiaries, collectively, are
referred to as "CCBG" or the "Company".
On January 1, 1995, the Company completed a corporate reorganization whereby
seven of the Company's ten banking affiliates were merged to form one bank. The
new bank, "Capital City Bank" is headquartered in Tallahassee and has twenty
offices covering four counties. See Note 17 in the Notes to Financial Statements
for further information.
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 1994, the Company's earnings were $8.8 million, or $3.10 per share. This
compares to earnings of $8.2 million, or $2.82 per share in 1993 and $8.4
million, or $2.86 per share in 1992. The earnings in 1993 of $8.2 million were
impacted by the adoption of Statement of Accounting Standards No. 109
("Accounting for Income Taxes"), which resulted in a one-time, non-cash charge
of $484,000, or $.17 per share. On a per share basis, earnings increased 9.9% in
1994 versus a decrease of 1.4% in 1993. Factors which had a significant impact
on the Company's earnings in 1994, as compared to 1993, include:
* Higher average earning assets and improvement in the margin resulted in an
increase in net interest income of $1.6 million.
* Loan growth and a higher level of net charge-offs resulted in an increase in
the loan loss provision of $286,000.
* Gains on the sale of real estate of $827,000 and an increase in credit card
fees of $620,000 contributed to the growth in noninterest income. This
growth was partially offset by a $374,000 reduction in mortgage origination
fees and losses on the sale of securities of $146,000.
* Corporate reorganization expense of $731,000 and an increase in credit card
processing fees of $485,000 contributed to the increase in noninterest
expense.
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,
1994 1993 1992
Interest and Dividend Income $47,891 $46,395 $48,306
Taxable-Equivalent Adjustments 1,657 1,663 1,583
49,548 48,058 49,889
Interest Expense 14,726 14,840 18,531
Net Interest Income 34,822 33,218 31,358
Provision for Loan Losses 1,246 960 1,216
Taxable-Equivalent Adjustments 1,657 1,663 1,583
31,919 30,595 28,559
Noninterest Income 12,813 12,014 11,478
Noninterest Expense 32,515 30,572 28,497
Income Before Income Taxes 12,217 12,037 11,540
Income Taxes 3,392 3,309 3,164
Income Before Accounting Change 8,825 8,728 8,376
Cumulative Effect of Accounting Change - (484) --
Net Income $ 8,825 $ 8,244 $ 8,376
Income Per Share Before Accounting Change $ 3.10 $ 2.99 $ 2.86
Net Income Per Share $ 3.10 $ 2.82 $ 2.86
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.
In 1994, taxable-equivalent net interest income increased $1.6 million, or 4.8%.
This follows an increase of $1.9 million, or 5.9%, in 1993 and $1.6 million, or
5.4%, in 1992. During 1994, higher levels of earning assets and an increasing
net interest margin were the primary factors contributing to the Company's
overall increase in taxable- equivalent net interest income.
Table 2
AVERAGE BALANCES AND INTEREST RATES
(Taxable-Equivalent Basis - Dollars in Thousands)
1994 1993 1992
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
Assets:
Loans, Net Unearned
Interest (1)(2) $406,873 $35,516 8.73% $381,807 $ 33,579 8.79% $358,876 $34,898 6.40%
Taxable Investment
Securities 146,789 7,271 4.95% 139,875 7,395 5.29% 115,368 7,393 6.51%
Tax-Exempt Investment
Securities (2) 71,683 5,092 7.10% 65,256 5,130 7.86% 51,794 4,870 9.40%
Funds Sold 41,574 1,669 4.02% 64,104 1,954 3.05% 72,089 2,728 3.79%
Total Earning Assets 666,919 49,548 7.43% 651,042 48,058 7.38% 598,127 49,889 8.34%
Cash & Due From Banks 46,445 45,536 40,346
Allowance Loan Losses (7,766) (7,641) (7,877)
Other Assets 39,736 33,349 31,554
TOTAL ASSETS $745,334 $722,286 $662,150
Liabilities:
NOW Accounts $ 92,957 1,809 1.95% $ 78,119 $ 1,617 2.09% $ 67,155 $1,770 2.64%
Money Market Accounts 76,173 1,731 2.27% 80,036 l,779 2.24% 74,082 2,316 3.13%
Savings Accounts 107,741 2,598 2.41% 113,850 2,953 2.59% 92,053 3,652 3.97%
Other Time Deposits 214,068 7,853 3.67% 208,729 7,864 3.77% 211,354 10,047 4.75%
Total Interest
Bearing Deposits 490,939 13,991 2.85% 480,734 14,213 2.96% 444,644 17,785 4.00%
Funds Purchased 18,291 650 3.55% 17,765 548 3.08% 18,163 535 2.95%
Other Borrowed Funds 844 31 3.67% 1,069 23 2.18% 1,072 32 3.02%
Long-Term Debt 1,144 54 4.72% 1,381 56 4.06% 3,156 179 5.66%
Total Interest
Bearing Liabilities 511,218 14,726 2.88% 500,949 14,840 2.97% 467,035 18,531 3.97%
Noninterest Bearing
Deposits 156,315 149,590 128,518
Other Liabilities 7,238 5,419 5,519
TOTAL LIABILITIES 674,771 655,958 601,072
Shareholders' Equity:
Common Stock 31 31 31
Surplus 5,852 5,857 5,858
Retained Earnings 64,680 60,440 55,189
TOTAL SHAREHOLDERS'
EQUITY 70,563 66,328 61,078
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $745,334 $722,286 $662,150
Interest Rate Spread 4.55% 4.41% 4.37%
Net Interest Income $ 34,822 $ 33,218 $ 31,358
Net Interest Margin (3) 5.22% 5.10% 5.24%
(1) Average balances include nonaccrual loans and interest income includes fees on loans of approximately $1,619,000, $1,610,000,
and $1,377,000 in 1994, 1993 and 1992, respectively.
(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.
(3) Net interest income divided by earning assets.
Table 3
RATE/VOLUME ANALYSIS(1)
(Dollars in Thousands)
1994 Change From 1993 1993 Change From 1992
Due To Due To
Average Average
Total Volume Rate Total Volume Rate
Earning Assets:
Loans, Net of Unearned Interest(2) $ 1,936 $2,204 $(268) $(1,319) $1,468 $(2,787)
Investment Securities:
Taxable (124) 365 (489) 2 1,595 (1,593)
Tax Exempt (2) (37) 505 (542) 260 1,266 (1,006)
Funds Sold (285) (687) 402 (774) (303) (471)
Total 1,490 2,387 (897) (1,831) 4,026 (5,857)
Interest Bearing Liabilities:
NOW Accounts 192 310 (118) (153) 289 (442)
Money Market Accounts (48) (87) 39 (537) 186 (723)
Savings Accounts (355) (158) (197) (699) 865 (1,564)
Other Time Deposits (12) 201 (213) (2,183) (125) (2,058)
Funds Purchased 102 16 86 13 (12) 25
Other Borrowed Funds 8 (5) 13 (9) - (9)
Long-Term Debt (2) (10) 8 (123) (100) (23)
Total (115) 267 (382) (3,691) 1,103 (4,794)
Change in Net Interest Income $1,605 $2,120 $(515) $1,860 $2,923 $(1,063)
(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.
(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.
Interest rates, after declining for the last several years, increased sharply in
1994. The prime rate increased from 6.00% to 8.50% and the Federal Reserve
Bank's discount rate has increased from 3.0% to 4.75%.
The Company's taxable-equivalent yield on average earning assets of 7.43%
reflected little change from 7.38 in 1993, compared to a 96 basis point decrease
from 8.34% to 7.38% in 1993. A review of the quarterly yields during 1994,
however, reveals a sharp increase as the yield rose from 7.20% in the first
quarter to 7.72% in the fourth. Improvement in the quarterly yield during 1994
is attributable to both higher interest rates and loan volume, which increased
steadily throughout the year. The loan portfolio, which is the largest and
highest yielding component of earning assets, increased from 59.5% in the fourth
quarter of 1993 to 63.6% in the fourth quarter of 1994. The lower yields on
earning assets in 1992 and 1993 are reflective of the interest rate environment
during those years and sluggish loan volume.
The average rate paid on interest bearing liabilities in 1994 was 2.88% versus
2.97% in 1993 and 3.97% in 1992. In prior years, the lower average rates were
reflective of lower interest rates and a favorable deposit mix, as certificates
of deposits which are generally the most expensive source of funds, declined
relative to total funding sources. As rates rose in 1994, the average rate paid
increased to a level of 3.23% during the fourth quarter and certificates of
deposit began increasing as a percent of funding sources.
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 14 basis points in 1994 and 4 basis points in 1993.
Improvement in the interest rate spread is primarily attributable to a reduction
in the average rate paid on interest bearing liabilities.
The Company's net interest margin (defined as taxable-equivalent interest income
less interest expense divided by average earning assets) increased to 5.22% in
1994, compared to 5.10% in 1993 and 5.24% in 1992. The increase in 1994 is
attributable to the improved spread and a reduction in the volume of earning
assets funded through interest bearing liabilities.
During the fourth quarter of 1994 the interest rate spread and net interest
margin declined slightly relative to the prior quarter. With increasing
competition and pricing pressures for both assets and liabilities, these
relatively strong margins will be difficult to maintain. During 1995,
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 1995.
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 $1.2 million in 1994 versus $960,000 in 1993
and $1.2 million in 1992. The increase in 1994 enabled the Company to cover net
charges to the allowance for loan losses and to maintain the level of the
allowance at 1.79% of outstanding loans. Management considers the allowance to
be adequate based on the current level of nonperforming loans and the potential
for loss inherent in the portfolio at year-end. See the section entitled
"Financial Condition" for further discussion regarding the allowance for loan
losses. Selected loss coverage ratios are presented below:
1994 1993 1992
Provision for Loan Losses as a
Multiple of Net Charge-offs 1.0x 1.0x 0.9x
Pre-tax Income Plus Provision
for Loan Losses as Multiple
of Net Charge-offs 10.5x 13.7x 9.8x
Noninterest Income
Noninterest income increased $799,000, or 6.6%, in 1994 compared with $536,000,
or 4.7%, in 1993. Factors affecting noninterest income are discussed below. In
1994, trust fees increased $37,000, or 5.8%, due to an increase in assets under
management which grew $12.7 million, or 14.0%. Assets under management totalled
$103.4 million at December 31, 1994. Trust fees increased $60,000, or 10.3%, in
1993, reflecting growth of $18.3 million, or 25.3%, in assets under management
and repricing of certain services.
Service charges on deposit accounts decreased $193,000, or 3.4%, in 1994,
compared to a decrease of $51,000, or 0.9%, in 1993. 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 increased $54,000, or 2.3%, in 1994 versus an decrease
of $66,000, or 2.7%, in 1993. The data processing center provides computer
services to both financial and non-financial clients in North Florida and South
Georgia. In recent years, growth in revenues has been provided by processing
for clients other than financial institutions. Non-financial revenues
represented approximately one half of the total processing revenues in 1994. In
1993, the reduction in revenues was primarily attributable to the repricing of
certain servicing agreements.
Net losses from the sale of securities recognized during 1994 totalled $147,000,
versus a gain of $28,000 in 1993. The net loss recognized in 1994 consisted of
gross gains of $13,000 and losses of $160,000. Of the $160,000 in losses,
$152,000 reflects management's decision to sell approximately $7,000,000 in
securities (including U.S. Governments and municipals) and reinvest the proceeds
in higher yielding securities. All other gains and losses recognized in 1994
and 1993 were related to the redemption of principal from mortgage-backed
securities and bonds which were called during the year.
Securities sold in 1994 were sold from the Available for Sale portfolio. See
Notes 1 and 3 in the Notes to Financial Statements for additional information on
the Company's investment portfolio, including the recognition of gains and
losses and the adoption of SFAS No. 115.
Other noninterest income increased $1.1 million, or 32.0%, in 1994 versus
$562,000, or 20.1% in 1993. The primary factors impacting other noninterest
income in 1994, were gains on the sale of real estate and credit card fees which
increased $827,000 and $620,000, respectively, over the prior year and a
reduction in mortgage origination fees of $374,000. Gains on the sale of real
estate were comprised of $430,000 recognized on the sale of Other Real Estate
and $397,000 on the sale of bank premises. In 1993, real estate gains totalled
$225,000 which was up just slightly over 1992. While several factors impacted
credit card fees, the majority of the increase is attributable to volume. The
Company originates residential mortgage loans to sell in the secondary market.
Loan origination in 1994 fell from $55.5 million in 1993 to $34.8, contributing
to the $374,000, or 38.0% decline in origination fees. Higher origination
volume in 1993 generated an increase in fees of $477,000, or 93.8%, over 1992.
Noninterest income as a percent of average earning assets represented 1.92% in
1994 compared to 1.85% in 1993 and 1.92% in 1992.
Noninterest Expense
Total noninterest expense for 1994 was $32.5 million, an increase of $1.9
million, or 6.4%, over 1993, compared with an increase of $2.1 million, or 7.3%,
in 1993. The most significant factors impacting the Company's noninterest
expense during 1994 were costs associated with the Company's corporate
reorganization, an increase in credit card processing expense and compensation.
The Company's compensation expense totalled $17.1 million, an increase of
$904,000, or 5.6%, over 1993. Salaries and wages increased $732,000, or 5.6%,
due to annual raises and an increase in the number of offices opened for a full
year in 1994. Additionally, the Company's pension expense increased $214,000,
or 31.7%. In 1994 management 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. In 1995, based on
the current level of interest rates, management plans to revise the rate
assumptions to incorporate a higher interest rate which should have a favorable
impact on the Company's pension expense in 1995. The Company's compensation
expense totalled $16.2 million in 1993, an increase of $1.6 million, or 11.4%,
over 1992. In 1993, factors which impacted the Company's compensation expense,
included the addition of three new offices which added 13 employees, higher
pension expense and implementation of the Company's 1992 Stock Incentive Plan.
Nineteen ninety-three was the first year the Company incurred stock compensation
expense as plan participants became eligible to earn shares under the Plan. The
expense for 1993 and 1994 of $354,000 and $257,500, respectively, reflects the
cost of shares earned in each year, plus an allocation of expense for shares
eligible for issuance in future years.
Occupancy expense (including furniture, fixtures & equipment) was up by $162,000
(3.2%) and $207,000 (4.2%) in 1994 and 1993, respectively. During 1994, the
Company completed building renovations, opened a new operations center and
acquired an additional banking location. Depreciation, property taxes, and
maintenance and repairs associated with the new and existing facilities were the
primary expense categories contributing to the overall increases in both 1994
and 1993. During the second half of 1994, depreciation expense began to
increase as renovations were completed and new facilities were placed into
service. As a result of these increases plus planned capital expenditures it is
anticipated depreciation expense will continue to increase throughout 1995.
Other noninterest expense increased $877,000, or 9.4%, in 1994, compared to an
increase of $215,000, or 2.4%, in 1993. The increase in 1994 is attributable to
corporate reorganization expenses and an increase in credit card processing
fees. Corporate reorganization expenses prior to year-end 1994 totaled
$731,000, consisting primarily of expenses associated with advertising/public
relations, fixed asset disposals, legal/filing fees and printing/supplies.
While several factors impacted credit card processing fees, the primary factors
were an increase in the number of merchant accounts and the purchase of a credit
card portfolio which significantly increased the cardholder base. The increase
in 1993 of $215,000 is primarily associated with the opening of 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.
Net noninterest expense (defined as noninterest income minus noninterest
expense) as a percent of average earning assets was 2.95% in 1994 compared to
2.85% in 1993 and 1992. The increase over prior years is attributable to the
expense of corporate reorganization.
Income Taxes
The consolidated provision for federal and state income taxes was $3.4 million
in 1994 compared to $3.3 million in 1993 and $3.2 million in 1992. 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 27.8% in 1994, 27.5% in 1993 and 27.4% in 1992. These
rates differ from the statutory tax rates due primarily to tax-exempt income.
The increase in the effective tax rate is primarily 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 25.11% in 1994, 26.8% in 1993 and 26.6% in 1992.
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 of 1993. See Note
1 in the Notes to Financial Statements.
Financial Condition
Average assets increased $23.0 million, or 3.2%, from $722.3 million in 1993 to
$745.3 million in 1994. Average earning assets increased to $666.9 million in
1994, a $15.9 million, or 2.4% increase over 1993. After experiencing a
reduction in loans in 1991 and 1992, loan volume began to improve in 1993.
Including $13.2 million in loans acquired through branch acquisitions in 1993,
loans grew $22.9 million, or 6.4%. This growth continued in 1994 as loans
increased $25.1 million, or 6.6%. The Company's average investment portfolio
increased $13.3 million, or 6.5%. Funding for growth in the loan and investment
portfolios, as well as an increase in the Company's fixed assets, was provided
by deposit growth of $16.9 million, or 2.7%, and a reduction in the federal
funds sold position of $22.5 million, or 35.1%.
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.
Loans
While very sluggish in 1991 and 1992, loan activity began to increase in the
latter half of 1993 and continued throughout 1994. In recent years, 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.
Local markets served by Group banks were generally improved during 1994. As
interest rates began to rise, certain activity was adversely affected including
automobile sales and housing construction. These areas of activity have
contributed appreciably to loan demand in the past and the decrease in demand
seems to be in the early stages.
The general deterioration in economic conditions, particularly in the real
estate market, during the period 1990 to 1993, 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 that 1995 will show signs of economic improvement,
affording opportunities to increase loans outstanding and enhance the
portfolio's overall contribution to earnings.
Table 4
SOURCES OF EARNING ASSET GROWTH
(Average Balances - Dollars in Thousands)
1993 to Percentage Components
1994 of Total of Total Earnings Assets
Change Change 1994 1993 1992
Loans:
Commercial, Financial
and Agricultural $ 1,660 10.5% 6.6% 6.5% 7.0%
Real Estate - Construction (371) (2.3) 3.1 3.2 3.8
Real Estate - Mortgage 22,181 139.7 38.0 35.5 35.2
Consumer 1,595 10.0 13.3 13.5 14.0
Total Loans 25,065 157.9 61.0 58.7 60.0
Securities:
Taxable 6,914 43.5 22.0 21.5 19.3
Tax-Exempt 6,428 40.5 10.8 10.0 8.7
Total Securities 13,342 84.0 32.8 31.5 28.0
Funds Sold (22,530) (141.90) 6.2 9.8 12.0
Total Earning Assets $15,877 100.0% 100.0% 100.0% 100.0%
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 $1.0 million, $6.5
million and $14.7 million at December 31, 1994, 1993 and 1992, respectively.
The Company's average loan-to-deposit ratio increased from 60.6% in 1993 to
62.9% in 1994 and by year-end had reached a level of 64.9%. Although the
Company experienced loan growth in 1993, the ratio declined from 62.6% in 1992
to 60.6%. The reduction in this percentage was attributable more to the
acquisition of $44 million in deposits than the lack of loan growth.
Real estate construction and mortgage loans, combined, represented 65.7% of
total loans in 1994 versus 65.4% in 1993. 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, 1994, 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 46.9% in 1993 to 40.2% in 1994.
Allowance for Loan Losses
Management attempts to maintain the allowance for loan losses at a level
sufficient to provide for potential losses inherent 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 losses inherent
in the loan portfolio which are not specifically identified. The general
reserve is based upon management's evaluation of the current and forecasted
operating and economic environment coupled with 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.
Table 5
LOANS BY CATEGORY
(Dollars in Thousands)
As of December 31,
1994 1993 1992 1991 1990
Commercial, Financial and
Agricultural $ 39,288 $ 46,963 $57,188 $57,692 $78,279
Real Estate - Construction 24,314 22,968 19,103 18,714 14,527
Real Estate - Mortgage 255,755 242,741 212,080 208,091 206,600
Consumer 106,656 93,895 89,848 89,529 90,468
Total Loans $426,013 $406,567 $378,219 $374,026 $389,874
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 $ 33,097 $ 4,384 $ 1,807 $ 39,288
Real Estate 213,878 56,058 10,133 280,069
Consumer 59,558 46,929 169 106,656
Total $306,533 $107,371 $12,109 $426,013
Loans with Fixed Rates $ 79,498 $ 80,761 $10,937 $171,196
Loans with Floating or
Adjustable Rates 227,035 26,610 1,172 254,817
Total $306,533 $107,371 $12,109 $426,013
The allowance for loan losses at December 31, 1994 of $7.6 million equals 1.79%
of year-end loans. While the amount of the allowance has remained relatively
constant at $7.6 million since 1992, the allowance as a percent of total loans
has declined from 2.05% in 1992 to 1.79% in 1994. The lower percentage is
attributable to a reduction in the Company's nonperforming loans. See the
section entitled "Risk Element Assets" for a further discussion.
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 considered it prudent to
maintain the allowance at a level above that of historical levels. As mentioned
above, the level of the allowance as a percent of total loans declined in 1994.
If, during 1995, management is successful in further reducing the level of
nonperforming loans, net charge-offs remain low and the economy continues to
show evidence of improvement, management may consider a further reduction in the
level of the allowance relative to total loans.
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, 1994, is adequate to absorb 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 unidentified inherent losses.
Table 7
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(Dollars in Thousands)
For the Years Ended December 31,
1994 1993 1992 1991 1990
Balance at Beginning of Year $7,594 $7,585 $7,670 $7,526 $6,168
Charge-Offs:
Commercial, Financial
and Agricultural 575 556 511 724 878
Real Estate - Construction - - 33 - -
Real Estate - Mortgage 315 81 460 175 169
Consumer 865 884 929 1,263 1,331
Total Charge-Offs 1,755 1,521 1,933 2,162 2,378
Recoveries:
Commercial, Financial
and Agricultural 104 198 231 177 126
Real Estate - Construction - - - - -
Real Estate - Mortgage 12 8 7 18 14
Consumer 350 364 394 294 254
Total Recoveries 466 570 632 489 394
Net Charge-Offs 1,289 951 1,301 1,673 1,984
Provision for Loan Losses 1,246 960 1,216 1,817 3,342
Balance at End of Year $7,551 $7,594 $7,585 $7,670 $7,526
Ratio of Net Charge-Offs During
Year to Average Loans Out-
standing, Net of Unearned Interest .32% .25% .36% .45% .52%
Allowance for Loan Losses as
Percentage of Loans, Net of Un-
earned Interest, at End of Year 1.79% 1.90% 2.05% 2.10% 1.98%
Allowance for Loan Losses as a
Multiple of Net Charge-Offs 5.86x 7.99x 5.83x 4.58x 3.79x
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.
The Company's nonaccruing loans decreased $5.1 million, or 54.3%, from a level
of $9.4 million at December 31, 1993 to $4.3 million at December 31, 1994.
During 1994, loans totalling approximately $2.1 million were placed on
nonaccrual, while loans totalling $7.1 million were removed from nonaccruing
status. Of the $2.1 million, three credit relationships comprised $1.3 million
of the total. All three relationships are secured with real estate and
management has allocated specific reserves to these credits to absorb
anticipated losses. Of the $7.1 million removed from the nonaccrual category,
$2.2 million consists of principal reductions, $2.1 consists of loans which were
brought current and returned to an accrual basis and $1.9 million consists of
loans which were refinanced. The remaining decrease of $1.0 million represents
loans which were either charged off or transferred to other real estate.
Table 8
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars in Thousands)
1994 1993 1992 1991 1990
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
Commercial, Financial
and Agricultural $ 442 9.3% $ 936 11.6% $1,416 15.1% $1,699 15.4% $1,293 20.1%
Real Estate:
Construction 187 5.7% 501 5.6% 647 5.0% 955 5.0% 628 3.7%
Mortgage 2,938 60.0% 2,459 59.7% 2,715 56.1% 2,148 55.7% 3,354 53.0%
Consumer 963 25.0% 420 23.1% 425 23.8% 741 23.9% 1,402 23.2%
Not Allocated 3,021 - 3,278 - 2,382 - 2,127 - 849 -
Total $7,551 100.0% $7,594 100.0% $7,585 100.0% $7,670 100.0% $7,526 100.0%
Table 9
RISK ELEMENT ASSETS
(Dollars in Thousands)
As of December 31,
1994 1993 1992 1991 1990
Nonaccruing Loans $4,278 $ 9,353 $ 6,987 $ 8,423 $10,898
Restructured 1,694 65 169 176 297
Total Nonperforming Loans 5,972 9,418 7,156 8,599 11,195
Other Real Estate 1,581 3,466 4,416 4,385 3,253
Total Nonperforming Assets $7,553 $12,884 $11,572 $12,984 $14,448
Past Due 90 Days or More $ 258 $ 104 $ 2,564 $ 622 $ 1,671
Nonperforming Loans to Loans,
Net of Unearned Interest 1.42% 2.36% 1.93% 2.36% 2.95%
Nonperforming Assets to Loans,
Net of Unearned Interest
Plus Other Real Estate 1.79% 3.20% 3.09% 3.52% 3.77%
Nonperforming Assets to Capital(1) 9.45% 17.24% 16.36% 19.86% 23.70%
Reserve to Nonperforming Loans 126.44% 80.64% 105.99% 89.20% 67.23%
(1) For computation of this percentage, "capital" refers to shareholders' equity
plus the allowance for loan losses. The majority of nonaccrual loans are
collateralized with real estate. Management continually reviews these loans and
believes specific reserve allocations are sufficient to cover the loss exposure
associated with these loans.
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 $474,000
higher for the year ended December 31, 1994.
Restructured loans are loans with reduced interest rates or deferred payment
terms due to deterioration in the financial position of the borrower. The
difference in interest income which would have been recorded under the original
terms of the restructured loans and the interest income recognized for the year
ended December 31, 1994 was $55,200.
Other real estate totalled $1.6 million at December 31, 1994, versus $3.5
million at December 31, 1993. 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 1994, the Company added properties
totalling $354,000 and liquidated, partially or completely, properties totalling
$2.3 million, resulting in a net reduction in other real estate of $1.9 million.
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 $597,000 at December 31,
1994.
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. The seven banks which were merged on January 1, 1995, to
form Capital City Bank are located within a thirty-mile radius of one another
and comprise 81% of the Company's total loans at year-end. 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,
1994, approximately 66% of the portfolio consisted of real estate loans.
Residential properties comprise approximately 54% 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, 1994, 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 Company's average investment portfolio increased $13.3 million, or 6.5%,
during 1994. This followed an increase of $38.0 million, or 22.7%, in 1993. As
a percent of average earning assets, the investment portfolio has increased to a
level of 32.8% in 1994 from 21.9% in 1991. The significant increase in the size
of the portfolio relative to earning assets is attributable to the slowdown in
loan production.
In 1994, average taxable investments increased $6.9 million, or 4.9%, while tax-
exempt investments increased $6.4 million, or 9.8%. 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, consistently reduced its holdings. Even with the
growth in tax-exempt investments in the last two years, the tax- exempt
portfolio as a percent of average earning assets has declined from 18.9% in 1986
to 10.7% in 1994. Management will 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.
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. In 1994, the Company adopted SFAS No. 115 -- "Accounting for
Investments in Certain Debt and Equity Securities". In accordance with the new
accounting pronouncement, securities are to be classified as "Held to Maturity",
"Available for Sale" or "Trading". To be classified as Held to Maturity,
management must have both the ability and the positive intent to hold securities
to maturity. Securities in this category are carried on the books at amortized
cost. It is not management's intent nor practice to participate in the trading
of investment securities for the purpose of recognizing gains and therefore the
Company does not maintain a Trading portfolio. However, management felt it was
prudent to establish an Available for Sale portfolio in order to provide the
flexibility necessary to properly manage the Company's interest rate risk and
liquidity position. Upon adoption of SFAS No. 115, management classified
approximately 30% of the total investment portfolio as Available for Sale.
Securities in the Available for Sale portfolio are recorded at fair value and
unrealized gains and losses associated with these securities are recorded, net
of tax, as a separate component of shareholders' equity. At December 31, 1994,
shareholders' equity included a net unrealized loss of $884,000. See the section
entitled "Accounting Pronouncements" and Notes 1 and 3 in the Notes to Financial
Statements for a further discussion of SFAS No. 115.
Historically, when purchasing securities management has had both the ability and
intent to hold the securities for the foreseeable future and sales, including
the gains or losses recognized from such sales, were minimal. In 1994, the
Company sold approximately $7,000,000 in securities, incurring a net pre-tax
loss of $152,000, in order to invest in higher yielding securities. These
securities were sold from the Available for Sale portfolio and there were no
sales from the Held to Maturity portfolio in 1994.
In 1993, proceeds from the sale of securities were nominal. However, proceeds
from "called" bonds and principal redemption of mortgage-backed securities
totalled $31.7 million and the related gains and losses totaled $69,000 and
$41,000, respectively.
The average maturity of the total portfolio at December 31, 1994 and 1993, was
2.41 and 2.34 years, respectively. See Table 11 for a breakdown of maturities by
portfolio.
The weighted average taxable-equivalent yields of the Held to Maturity and
Available for Sale portfolios at December 31, 1994, were 5.56% and 6.25%,
respectively versus 5.51% for the total portfolio in 1993. The quality of the
municipal portfolio at such date is depicted in the chart below. 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, 1994.
The net unrealized loss in the total portfolio at December 31, 1994, of $6.8
million compares with a gain of $2.7 million at December 31, 1993. See Note 3
in the Notes to Financial Statements for a breakdown of unrealized gains and
losses by portfolio. Tables 10 and 11 present a detailed analysis of the
Company's investment securities as to type, maturity and yield.
MUNICIPAL PORTFOLIO QUALITY
Carrying Value
Moody's Rating (000's) Percentage
AAA $40,733 59.9%
AA-1 870 1.3%
AA 2,685 3.9%
A-1 5,560 8.2%
A 10,060 14.7%
BAA 1,000 1.5%
Not Rated(1) 7,130 10.5%
Total $68,038 100.0%
(1) Of the securities not rated by Moody's,
$4.5 million are rated "A" or higher by S&P.
Table 10
DISTRIBUTION OF INVESTMENT SECURITIES
(Dollars In Thousands)
1994
Amortized Unrealized Unrealized Market
Held To Maturity Cost Gains Losses Value
U.S. Treasury $ 72,979 $ - $ 1,681 $ 71,298
U.S. Government Agencies
and Corporations 23,018 3 1,415 21,606
States and Political
Subdivisions 49,125 135 2,027 47,233
Mortgaged Backed Securities 3,005 1 182 2,824
Other Securities 2,314 - 272 2,042
Total Investment Securities $ 150,441 $ 139 $ 5,577 $ 145,003
1994
Amortized Unrealized Unrealized Market
Available For Sale Cost Gains Losses Value
U.S. Treasury $ 18,634 $ - $ 180 $ 18,454
U.S. Government Agencies
and Corporations 7,041 2 443 6,600
States and Political
Subdivisions 19,641 77 805 18,913
Mortgaged Backed Securities 2,932 - 32 2,900
Other Securities 1,981 1 2 1,980
Total Investment Securities $ 50,229 $ 80 $ 1,462 $ 48,847
Table 11
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
(Dollars in Thousands)
HELD TO MATURITY
As of December 31, 1994
Weighted
Amortized Cost Market Value Average
Yield(1)
U. S. GOVERNMENTS
Due in 1 year or less $ 29,781 $ 29,375 4.24%
Due over 1 year thru 5 years 66,216 63,530 5.33%
Due over 5 years thru 10 years - - -
Due over 10 years - - -
TOTAL $ 95,997 $ 92,905 4.99%
STATE & POLITICAL SUBDIVISIONS
Due in 1 year or less $ 6,963 $ 6,965 7.19%
Due over 1 year thru 5 years 26,560 25,829 6.99%
Due over 5 years thru 10 years 14,560 13,437 6.39%
Due over 10 years 1,042 1,002 8.22%
TOTAL $ 49,125 $ 47,233 6.87%
MORTGAGED BACKED SECURITIES
Due in 1 year or less $ - $ - -
Due over 1 year thru 5 years 1,630 1,571 6.55%
Due over 5 years thru 10 years 460 457 8.10%
Due over 10 years 915 795 6.31%
TOTAL $ 3,005 $ 2,823 6.72%
Other Securities $ 2,314 $ 2,042
Total Investment Securities $150,441 $145,003
AVAILABLE FOR SALE
As of December 31, 1994
Weighted
Amortized Cost Market Value Average
Yield(1)
U. S. GOVERNMENTS
Due in 1 year or less $ 7,536 $ 7,498 4.09%
Due over 1 year thru 5 years 17,644 17,123 6.00%
Due over 5 years thru 10 years 495 433 5.47%
Due over 10 years - - -
TOTAL $ 25,675 $ 25,054 6.38%
STATE & POLITICAL SUBDIVISIONS
Due in 1 year or less $ 1,931 $ 1,947 8.48%
Due over 1 year thru 5 years 12,214 11,901 7.15%
Due over 5 years thru 10 years 5,496 5,065 6.35%
Due over 10 years - - -%
TOTAL $ 19,641 $ 18,913 6.64%
MORTGAGED BACKED SECURITIES
Due in 1 year or less $ - $ - -
Due over 1 year thru 5 years 2,409 2,381 6.94%
Due over 5 years thru 10 years 523 519 5.68%
Due over 10 years - - -%
TOTAL $ 2,932 $ 2,900 6.71%
Other Securities $ 1,981 $ 1,980
Total Investment Securities $ 50,229 $ 48,847
AVERAGE MATURITY (In Years) AS OF DECEMBER 31, 1994
Held To Maturity Available For Sale
U. S. Governments 1.56 1.61
State and Political Subdivisions 3.73 3.67
Mortgaged Backed Securities 6.27 2.97
TOTAL 2.38 2.53
(1) Weighted average yields are calculated on the basis of the amortized cost of
the security. The weighted average yields on tax-exempt obligations are computed
on a taxable-equivalent basis using a 34% tax rate.
Deposits And Funds Purchased
Average total deposits increased from $630.3 million in 1993 to $647.3 million
in 1994, representing an increase of $17.0 million, or 2.7%. In 1993, deposits
increased $57.1 million, or 10.0%. Contributing to this growth was the
acquisition of approximately $44.0 million in deposits during the first quarter
of 1993.
Since 1991, the Company has experienced growth in noninterest bearing deposits
and a shift in funding sources from "Other Time" to other deposit categories.
This pattern, which began to reverse in 1994, ran counter to the Company's
historical trends in which a majority of the growth was generated from
certificates of deposits. During 1994 noninterest bearing deposits continued to
represent a significant portion of total deposit growth, but as interest rates
rose, depositors began to shift to certificates of deposits. If this shift in
the mix of deposits continues in 1995, as management anticipates due to the
higher rate environment, it will place additional pressure on the Company's net
interest margin.
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.
Average funds purchased, which are composed of federal funds purchased and
securities sold under agreements to repurchase, increased $526,0000, or 3.0%.
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements
(Dollars in Thousands)
1994 1993 1992
Year End Balance $13,964 $23,264 $17,561
Rate at Year End 5.38% 2.78% 2.53%
Average Balance $18,291 $17,765 $18,163
Average Rate 3.55% 3.08% 2.95%
Maximum Outstanding
at Month-End $35,516 $27,449 $26,441
Table 12
SOURCES OF DEPOSIT GROWTH
(Average Balances - Dollars in Thousands)
1993 to Percentage
1994 of Total Components of Total Deposits
Change Change 1994 1993 1992
Noninterest Bearing
Deposits $6,725 39.7% 24.1% 23.7% 22.4%
NOW Accounts 14,838 87.7 14.3 12.4 11.7
Money Market Accounts (3,863) (22.8) 11.8 12.7 12.9
Savings (6,108) (36.1) 16.7 18.1 16.1
Other Time 5,338 31.5 33.1 33.1 36.9
Total Deposits $16,930 100.0% 100.0% 100.0% 100.0%
Table 13
MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 OR OVER
(Dollars in Thousands)
December 31, 1994
Time Certificates of Deposit Percent
Three months or less $14,652 35.9%
Over three through six months 12,305 30.2
Over six through twelve months 8,976 22.0
Over twelve months 4,841 11.9
Total $40,774 100.0%
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.
The Company maintains two established credit facilities with each facility
offering $6.0 million in available credit, enabling the Company to borrow up to
$12 million for general corporate purposes. One facility matures every two
years and has historically been renewed at each maturity. The other facility
matures annually and may be renewed or, with the lender's approval, the balance
outstanding at maturity may be converted to a term loan which amortized in
twenty-four equal quarterly installments. Historically, management has chosen to
renew this facility at each maturity instead of selecting the term loan option.
These credit facilities mature on January 24, 1996 and July 21, 1995,
respectively. As of December 31, 1994, the Company had no debt outstanding
under either facility. There were no additional funds borrowed during 1994, and
the Company made principal reductions totalling $1.9 million. The average rate
on debt outstanding during 1994 was 4.72%. See Note 8 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 the Company's equity capital, and federal and state regulatory agencies have
established regulations which govern the payment of dividends to a bank holding
company by its bank subsidiaries. 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 8 and 12 in the Notes to
Financial Statements for additional information.
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, 1994, the Company had $102.0 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 will approximate $6.3 million over the
next twelve months. 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)
1994 1993 1992
Common Stock $ 31 $ 31 $ 31
Surplus 5,852 5,857 5,857
Unrealized Losses (884) - -
Retained Earnings 73,989 67,753 61,937
Subtotal 78,988 73,641 67,825
Treasury Stock (6,588) (6,501) (4,656)
Total Shareholders'
Equity $72,400 $67,140 $63,169
The Company continues to maintain a strong capital position. The ratio of
shareholders' equity to total assets at year-end was 9.75%, 8.81% and 9.20% in
1994, 1993 and 1992, 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,
1994 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 16.77% and a Tier I ratio
of 15.52%.
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 9.56%, which is in excess of regulatory
requirements.
In 1994, the Board of Directors declared dividends totalling $.91 per share,
consisting of $.11 per share payable in July 1994 and $.80 per share payable in
January 1995. The Company declared dividends of $.83 per share in 1993 and $.78
per share in 1992. The dividend payout ratio was 29.3%, 29.4% and 27.3% for
1994, 1993 and 1992, respectively. Dividends declared per share in 1994
represented a 9.6% increase over 1993.
At December 31, 1994, the Company's common stock had a book value of $25.44 per
share compared to $23.56 in 1993 and $21.59 in 1992. In 1994, book value was
impacted by the adoption of SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which requires the unrealized gains or losses on
securities held in the Available for Sale securities portfolio be recorded, net
of taxes, as a component of the Company's equity capital. At December 31, 1994,
the net unrealized loss was $884,000 which reduced book value by $.31 per share.
See Notes 1 and 3 for further discussion of SFAS No. 115.
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 $30.00 per share for the two-year
period ended December 31, 1994, with the most recent trades at $30.00 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, 1994,
the Company has repurchased 259,428 shares, of which 5,819 shares were acquired
during 1994. The shares acquired in 1994 were purchased at an average cost of
$26.00 per share. On January 20, 1995, 6,865 shares were issued to
participants for achieving certain established performance goals for the one and
two-year periods ended December 31, 1994. The total value of the shares issued
was $205,950 based on a stock price of $30.00 per share.
Interest Rate Sensitivity
Table 14 on page 40 presents the Company's consolidated interest rate
sensitivity position as of year-end 1994. 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
incorporate its own interest rate projections, liquidity needs and factors
specific to the local market into the analysis. The information in Table 14 has
been assembled and presented in response to regulatory reporting requirements.
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
As discussed in Note 1 in the Notes to Financial Statements, on January 1, 1994,
the Company adopted SFAS No. 115, which changed the accounting for certain debt
and equity securities from amortized cost to fair value. Those securities
classified as Available for Sale were reported at fair value of $48.8 million on
December 31, 1994. As required by the new accounting standard, the net
unrealized loss on investment securities in the Available for Sale portfolio was
recorded, net of taxes, as a separate component of shareholders' equity. This
net amount totaled $884,000 at December 31, 1994.
In 1993 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 did
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.
On January 1, 1995, the Company adopted SFAS No. 114 - "Accounting by Creditors
for Impairment of a Loan". As a result of applying the new rules, certain
impaired loans will be reported at the present value of expected future cash
flows using the loan's effective interest rate, or as a practical expedient, at
the loan's observable market price or the fair value of the collateral if the
loan is collateral dependent. The adoption of the standard did not have a
material impact on the Company's financial position or results of operations.
Table 14
INTEREST RATE SENSITIVITY ANALYSIS
(Dollars in Thousands)
December 31, 1994
Non-Rate
Sensitive &
0-90 Days 91-180 Days 181-365 Days Over One Year Total
Loans, Net of Unearned Interest $142,884 $ 53,951 $ 99,724 $ 124,245 $420,804
Investment Securities 12,445 14,755 20,971 151,117 199,288
Funds Sold 25,740 - - - 25,740
Total Earning Assets 181,069 68,706 120,695 275,362 645,832
Cash, Property and Other Assets 104,349 104,349
Less: Allowance for Loan Losses (7,551) (7,551)
Total Assets $181,069 $ 68,706 $120,695 $372,160 $742,630
Demand Deposits $ - $ - $ - $167,710 $167,710
NOW Accounts 95,540 - - - 95,540
Money Market 71,763 - - - 71,763
Savings 101,009 - - - 101,009
Other Time 60,072 57,385 47,698 46,996 212,151
Total Deposits 328,384 57,385 47,698 214,706 648,173
Funds Purchased 13,964 - - - 13,964
Other Borrowed Funds 999 - - - 999
Long-Term Debt - - - - -
Other Liabilities - - - 7,094 7,094
Shareholders' Equity - - - 72,400 72,400
Total Liabilities
& Shareholders' Equity $ 343,347 $ 57,385 $ 47,698 $294,200 $742,630
Interest Rate Sensitivity Gap $(162,278) $ 11,321 $ 72,997
Cumulative Interest Rate $(162,278) $(150,957) $(77,960)
Sensitivity Gap
Cumulative Gap as Percentage
of Earning Assets (25.13%) (23.37%) (12.07%)
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED FINANCIAL STATEMENTS
42
Report of Independent Certified Public Accountants
43
Consolidated Statements of Financial Condition
44
Consolidated Statements of Income
46
Consolidated Statements of Changes in Shareholders' Equity
47
Consolidated Statements of Cash Flows
49
Notes to Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Capital City Bank Group, Inc.
Tallahassee, Florida
We have audited the accompanying consolidated statement of financial
condition of Capital City Bank Group, Inc. (a Florida Corporation) and
subsidiaries as of December 31, 1994, and the related consolidated statements
of income, changes in shareholders' equity, and cash flows for the year then
ended. 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 audit. The financial statements of Capital City Bank
Group, Inc. and subsidiaries as of December 31, 1993 and 1992, were audited
by other auditors whose report dated February 4, 1994, on those statements
was unqualified and included an explanatory paragraph that described the change
in the Company's method of accounting for income taxes in 1993, as discussed in
Note 1 to the financial statements.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Capital City Bank Group,
Inc. and subsidiaries as of December 31, 1994, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, Capital City
Bank Group, Inc., changed its method of accounting for investment securities,
effective January 1, 1994.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 27, 1995
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
As of December 31,
1994 1993
ASSETS
Cash and Due From Banks (Note 7) $ 63,327,189 $ 56,664,688
Interest Bearing Deposits in Other Banks - 1,256,516
Investment Securities Held to Maturity
(market value $145,003,164 and $221,273,916
in 1994 and 1993) (Note 3) 150,441,260 218,622,520
Investment Securities Available for Sale (Note 3) 48,847,145 -
Federal Funds Sold 25,740,000 55,970,000
Loans (Notes 4 and 5) 426,012,721 406,566,731
Unearned Interest (5,208,716) (7,142,943)
Allowance for Loan Losses (7,551,025) (7,594,101)
Loans, Net 413,252,980 391,829,687
Premises and Equipment (Note 6) 24,292,288 20,820,473
Accrued Interest Receivable 5,546,092 5,467,174
Intangibles (Note 2) 1,378,408 1,719,491
Other Assets 9,804,822 9,984,232
Total Assets $742,630,184 $762,334,781
LIABILITIES
Deposits:
Noninterest Bearing Deposits $167,710,491 $171,984,693
Interest Bearing Deposits (Note 7) 480,463,376 490,760,129
Total Deposits 648,173,867 662,744,822
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements 13,964,450 23,264,047
Short-Term Borrowings 999,176 1,201,565
Long-Term Debt (Note 8) - 1,900,000
Other Liabilities 7,092,599 6,084,592
Total Liabilities 670,230,092 695,195,026
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value; 4,000,000 shares
authorized; 3,105,243 issued 31,052 31,052
Surplus 5,852,157 5,856,794
Retained Earnings 73,989,093 67,753,475
Treasury Stock: 259,428 shares in 1994
and 255,927 shares in 1993, at cost (6,587,956) (6,501,566)
Net Unrealized Loss on Available
for Sale Securities (884,254) -
Total Shareholders' Equity 72,400,092 67,139,755
Total Liabilities and
Shareholders' Equity $742,630,184 $762,334,781
The accompanying Notes to Financial Statements are an integral part of these
statements.
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
1994 1993 1992
INTEREST INCOME
Interest and Fees on Loans $35,490,332 $33,553,906 $34,871,997
Investment Securities:
U.S. Treasury 4,966,960 5,564,028 6,010,708
U.S. Government Agencies and Corporations 1,990,787 1,620,772 990,632
States and Political Subdivisions 3,460,921 3,492,347 3,312,997
Other Securities 313,453 210,272 391,609
Deposits in Other Banks 16,549 118,674 444,254
Federal Funds Sold 1,652,383 1,835,283 2,284,360
Total Interest Income 47,891,385 46,395,282 48,306,557
INTEREST EXPENSE
Deposits (Note 7) 13,990,514 14,213,212 17,784,924
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 650,286 547,611 535,311
Other Short-Term Borrowings 31,205 23,252 32,422
Long-Term Debt 53,703 56,009 178,619
Total Interest Expense 14,725,708 14,840,084 18,531,276
Net Interest Income 33,165,677 31,555,198 29,775,281
Provision for Loan Losses (Note 5) 1,245,900 960,114 1,215,868
Net Interest Income After Provision for
Loan Losses 31,919,777 30,595,084 28,559,413
NONINTEREST INCOME
Service Charges on Deposit Accounts 5,408,113 5,600,978 5,651,660
Data Processing 2,433,653 2,379,850 2,445,483
Income from Fiduciary Activities 680,520 643,360 583,248
Securities Transactions (Note 3) (146,921) 27,527 (2,147)
Other 4,437,857 3,362,683 2,800,331
Total Noninterest Income 12,813,222 12,014,398 11,478,575
NONINTEREST EXPENSE
Salaries and Employee Benefits (Note 10) 17,087,084 16,183,205 14,530,027
Occupancy, Net 2,343,541 2,182,842 2,022,418
Furniture and Equipment 2,910,020 2,908,648 2,861,428
Other 10,174,574 9,297,967 9,083,238
Total Noninterest Expense 32,515,219 30,572,662 28,497,111
Income Before Income Taxes and
Accounting Change 12,217,780 12,036,820 11,540,877
Income Taxes (Note 9) 3,392,471 3,308,614 3,164,341
Income Before Accounting Change 8,825,309 8,728,206 8,376,536
Cumulative Effect of a Change in
Accounting Method (Note 1) - (484,495) -
NET INCOME $ 8,825,309 $ 8,243,711 $ 8,376,536
Net Income Per Share Before Accounting Change $ 3.10 $ 2.99 $ 2.86
Net Income Per Share $ 3.10 $ 2.82 $ 2.86
Average Common Shares Outstanding 2,847,492 2,924,022 2,932,123
The accompanying Notes to Financial Statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Unrealized
Gains (Losses)
Common On Securities, Retained Treasury
Stock Surplus Net of Taxes Earnings Stock Total
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 of 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
($.83 per share) (2,426,663) (2,426,663)
Sale of Treasury Stock (400) 2,800 2,400
Purchase of Treasury Stock (1,848,388) (1,848,388)
Balance, December 31, 1993 31,052 5,856,794 67,753,475 (6,501,566) 67,139,755
Cumulative Adjustment Due to
Change In Accounting (Note 1) 847,835 847,835
Net Income 8,825,309 8,825,309
Cash Dividends
($.91 per share) (2,589,691) (2,589,691)
Sale of Treasury Stock (4,637) 64,904 60,267
Purchase of Treasury Stock (151,294) (151,294)
Net Change In Unrealized
Gains/(Losses) (1,732,089) (1,732,089)
Balance, December 31, 1994 $31,052 $5,852,157 $(884,254) $73,989,093 $(6,587,956) $72,400,092
The accompanying Notes to Financial Statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Years Ended December 31,
1994 1993 1992
Net Income $8,825,309 $8,243,711 $8,376,536
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses 1,245,900 960,114 1,215,868
Depreciation 1,915,771 1,881,207 1,862,930
Net Gain (Loss) on Sale of Properties 812,238 143,914 189,653
Amortization of Intangible Assets 341,083 337,994 259,171
Deferred Income Taxes 101,301 74,585 (143,529)
Cumulative Effect of Accounting Change - 484,495 -
Net (Increase) Decrease in
Interest Receivable (78,918) (339,456) 68,761
Net (Increase) Decrease in
Other Assets (79,463) (1,537,096) (421,002)
Net Increase (Decrease) in
Other Liabilities 604,322 318,515 (1,183,076)
Net Cash from Operating Activities 13,687,543 10,567,983 10,225,312
Cash Flows from Investing Activities:
Proceeds from Sales/Maturities of
Investment Securities 94,713,053 82,540,933 31,163,153
Purchase of Investment Securities (76,263,192) (114,725,989) (79,694,258)
Net (Increase) Decrease in Loans (22,669,193) (17,234,818) (6,438,547)
Purchase of Premises & Equipment (6,064,334) (6,952,279) (1,337,346)
Sales of Premises & Equipment 278,718 1,007,775 31,744
Cash Acquired in Bank Acquisitions - 28,811,166 -
Net Cash from Investing Activities (10,004,948) (26,553,212) (56,275,254)
Cash Flows from Financing Activities:
Net Increase (Decrease) in Deposits (14,570,955) 21,150,418 42,405,239
Net Increase (Decrease) in Federal
Funds Purchased (9,299,597) 5,702,833 2,648,874
Net Increase (Decrease) in Other
Borrowed Funds (202,389) (19,558) (19,247)
Addition to Long-Term Debt - 1,400,000 -
Repayment of Long-Term Debt (1,900,000) (1,500,000) (2,000,000)
Dividends Paid (2,447,279) (2,282,200) (2,153,230)
Sale (Purchase) of Treasury Stock (86,390) (1,845,988) (648,000)
Net Cash from Financing Activities (28,506,610) 22,605,505 40,233,636
Net Increase (Decrease) in Cash
and Cash Equivalents (24,824,015) 6,620,276 (5,816,306)
Cash and Cash Equivalents at Beginning
of Year 113,891,204 107,270,928 113,087,234
Cash and Cash Equivalents at End
of Year $ 89,067,189 $113,891,204 $107,270,928
Supplemental Disclosures:
Interest on Deposits $14,380,539 $14,943,964 $19,213,697
Interest on Debt $ 735,134 $ 626,872 $ 746,352
Taxes Paid $ 3,613,716 $ 3,013,311 $ 2,763,567
Loans Transferred To Other Real Estate $ 453,543 $ 910,228 $ 2,311,826
The accompanying Notes to Financial Statements are an integral part of these
statements.
Notes to Financial Statements
Note 1
SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Capital City Bank
Group, Inc., and its subsidiaries (the "Company"), all of which are wholly-
owned. All material intercompany transactions and accounts have been eliminated.
The Company follows generally accepted accounting principles and reporting
practices applicable to the banking industry. Prior year financial statements
and other information have been reclassified to conform to the current year
presentation. The principles which materially affect the financial position,
results of operations and cash flows are summarized below.
Cash and Cash Equivalents
Cash and cash equivalents includes cash and due from banks, interest-bearing
deposits in other banks, securities purchased under agreements to resell and
federal funds sold. Generally, federal funds are purchased and sold for one-day
periods and all items have an initial maturity of ninety days or less.
Investment Securities
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," as of
January 1, 1994. Prior to January 1, 1994, all investment securities were
classified as Held for Investment and recorded at amortized cost. In accordance
with SFAS No. 115, securities are classified as either "Held to Maturity" or
"Available for Sale".
Investment securities classified as Held to Maturity are stated at cost,
adjusted for amortization of premiums and accretion of discounts. Held-to-
Maturity securities are carried at amortized cost as the Company has the ability
and positive intent to hold these securities to maturity. Investment securities
in the Available for Sale portfolio are carried at fair value and represent
securities that are available to meet liquidity and/or other needs of the
Company. The Company does not maintain a trading account.
Gains and losses are recognized and shown separately in the Statements of Income
upon realization or when impairment of values is deemed to be other than
temporary. These gains or losses are recognized using the specific
identification method. Unrealized holding gains and losses for securities in the
Available for Sale portfolio are excluded from the Consolidated Statements of
Income and reported net of taxes as a separate component of shareholders' equity
until realized.
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
loans, is accrued based on the outstanding daily balances. Fees charged to
originate loans and loan origination costs are deferred and amortized over the
life of the loan as a yield adjustment.
Allowance for Loan Losses
Provisions for 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.
Statement of Financial Accounting Standards No. 114 -- "Accounting by Creditors
for Impairment of a Loan", as amended, requires impaired loans be measured based
on the present value of expected future cash flows discounted at the loan's
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. These two
accounting pronouncements, which were adopted on a prospective basis on January
1, 1995, will not have a material impact on the Company's financial condition or
results of operations.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation,
computed on the straight-line method over estimated useful lives for each type
of asset. 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 Company which was acquired
either through foreclosure or by receiving a deed in lieu of foreclosure. The
properties are included in "other assets" in the statement of financial
condition and are recorded at the estimated properties' fair value. Other real
estate totalled $1.6 and $3.4 million at December 31, 1994 and 1993,
respectively.
Income Taxes
The Company files 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 9 for
further discussion.
Note 2
BRANCH ACQUISITIONS
During 1993, the Company consummated the purchase and assumption of four branch
offices. The acquisition included the purchase of three office facilities (a
fourth is leased), $13.2 million in loans (consisting primarily of first
mortgage real estate loans) and the assumption of $44.1 million in deposits.
Assets and liabilities acquired through acquisition in 1993, on a combined
basis, are as follows:
1993
Loans $(13,229,315)
Premises & Equipment (855,319)
Intangible Assets (1,235,534)
Other Assets (69,455)
Total Assets $(15,389,623)
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.
No intangible assets were recorded during 1994. The pre-tax amortization of all
intangible assets was approximately $341,000 in 1994, $338,000 in 1993 and
$259,000 in 1992.
Note 3
INVESTMENT SECURITIES
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," as of
January 1, 1994. Upon adoption, management transferred approximately 30% of the
Company's portfolio to the "Available for Sale" category. Securities
transferred on January 1, 1994, were as follows:
Amortized
Category Cost
U. S. Treasuries $31,364,293
U. S. Government Agencies and
Corporations 10,089,014
State and Political Subdivisions 20,853,825
Other Securities 1,513,500
Total Available for Sale $63,820,632
The amortized cost and related market value of investment securities at December
31, were as follows:
1994
Amortized Unrealized Unrealized Market
Held To Maturity Cost Gains Losses Value
U.S. Treasury $ 72,978,594 $ 820 $ 1,681,065 $ 71,298,349
U.S. Government Agencies
and Corporations 23,018,508 2,348 1,415,216 21,605,640
States and Political
Subdivisions 49,125,322 134,399 2,026,379 47,233,342
Mortgaged Backed Securities 3,004,665 1,247 182,477 2,823,435
Other Securities 2,314,171 - 271,773 2,042,398
Total Investment Securities $150,441,260 $ 138,814 $ 5,576,910 $145,003,164
1994
Amortized Unrealized Unrealized Market
Available For Sale Cost Gains Losses Value
U.S. Treasury $ 18,633,625 $ 387 $ 179,763 $ 18,454,249
U.S. Government Agencies
and Corporations 7,040,903 2,608 443,002 6,600,509
States and Political
Subdivisions 19,640,990 77,321 805,423 18,912,888
Mortgaged Backed Securities 2,931,948 - 32,299 2,899,649
Other Securities 1,981,375 325 1,850 1,979,850
Total Investment Securities $ 50,228,841 $ 80,641 $ 1,462,337 $ 48,847,145
1993
Amortized Unrealized Unrealized Market
Held For Investment Cost Gains Losses Value
U.S. Treasury $111,233,251 $ 578,434 $ 88,831 $111,722,854
U.S. Government Agencies
and Corporations 35,314,555 320,299 82,178 35,552,676
States and Political
Subdivisions 67,069,825 1,991,218 111,589 68,949,454
Other Securities 5,004,889 47,657 3,614 5,048,932
Total Investment Securities $218,622,520 $ 2,937,608 $ 286,212 $221,273,916
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
1994 $11,475,751 $ 13,407 $ 160,328
1993 $31,681,176 69,249 41,722
1992 8,700,297 42,338 44,485
Total proceeds include principal reductions in mortgage backed securities and
proceeds from securities which were called of $4,032,934, $31,581,176, and
$8,293,692 in 1994, 1993 and 1992, respectively.
As of December 31, 1994, the Company's debt securities had the following
maturity distribution:
HELD TO MATURITY
Amortized Cost Market Value
Due in one year or less $ 36,743,847 $ 36,340,522
Due after one through five years 94,406,793 90,930,781
Due after five through ten years 17,334,158 15,934,697
Over ten years 1,956,462 1,797,164
Total Investment Securities $150,441,260 $145,003,164
AVAILABLE FOR SALE
Amortized Cost Market Value
Due in one year or less $ 9,467,325 $ 9,445,972
Due after one through five years 32,265,522 31,405,946
Due after five through ten years 8,495,994 7,995,227
Over ten years - -
Total Investment Securities $ 50,228,841 $ 48,847,145
Securities with an amortized cost of $70,539,314, and $86,441,723 at December
31, 1994 and 1993, respectively, were pledged to secure public deposits and for
other purposes as required by law.
Note 4
LOANS
At December 31, the composition of the Company's loan portfolio was as follows:
1994 1993
Commercial, Financial and
Agricultural $ 39,287,891 $ 46,962,666
Real Estate - Construction 24,314,439 22,968,331
Real Estate - Mortgage 255,754,940 242,740,428
Consumer 106,655,451 93,895,306
Total Loans $426,012,721 $406,566,731
Nonaccruing loans amounted to $4,278,523 and $9,352,869 at December 31, 1994 and
1993, respectively. Restructured loans amounted to $1,693,701, and $64,661 at
December 31, 1994 and 1993, respectively. If such nonaccruing and restructured
loans had been on a fully accruing basis, interest income would have been
$474,211 higher in 1994 and $846,000 higher in 1993.
Note 5
ALLOWANCE FOR LOAN LOSSES
An analysis of the changes in the allowance for loan losses for the years ended
December 31, is as follows:
1994 1993 1992
Balance, Beginning of Year $7,594,101 $7,584,958 $7,669,915
Provision for Loan Losses 1,245,900 960,114 1,215,868
Recoveries on Loans
Previously Charged-Off 466,088 569,765 632,219
Loans Charged-Off (1,755,064) (1,520,736) (1,933,044)
Balance, End of Year $7,551,025 $7,594,101 $7,584,958
Note 6
PREMISES AND EQUIPMENT
The composition of the Company's premises and equipment at December 31, was as
follows:
1994 1993
Land $ 5,285,682 $ 4,300,563
Buildings 20,001,014 18,348,113
Fixtures and Equipment 16,656,602 14,358,167
Total 41,943,298 37,006,843
Accumulated Depreciation (17,651,010) (16,186,370)
Premises and Equipment, Net $24,292,288 $20,820,473
Depreciation of $1,915,771, $1,881,207, and $1,862,930 was charged to operations
for 1994, 1993 and 1992, respectively.
Note 7
DEPOSITS
Interest bearing deposits, by category, as of December 31, are as follows:
1994 1993
NOW Accounts $ 95,539,952 $100,184,541
Money Market Accounts 71,762,847 77,301,643
Savings Accounts 101,009,197 110,127,691
Other Time Deposits 212,151,380 203,146,254
Total Interest Bearing Deposits $480,463,376 $490,760,129
Time deposits in denominations of $100,000 or more totalled $40,774,000 and
$40,936,000, at December 31, 1994 and 1993, respectively.
The average balances maintained on deposit with the Federal Reserve Bank for the
years ended December 31, 1994 and 1993, were $27,600,000 and $25,031,000,
respectively.
Interest expense on deposits for the three years ended December 31, is as
follows:
1994 1993 1992
NOW Accounts $ 1,808,766 $ 1,616,631 $ 1,770,024
Money Market Accounts 1,730,973 1,778,928 2,315,965
Savings Accounts 2,598,076 2,953,208 3,651,544
Other Time Deposits 7,852,699 7,864,445 10,047,391
Total $13,990,514 $14,213,212 $17,784,924
Note 8
LONG-TERM DEBT
The Company has established and maintains two $6.0 million revolving lines of
credit. The credit facilities are collateralized by 100% of the common stock of
the Company's lead banking subsidiary. The credit facilities expire on July 21,
1995 and January 24, 1996, respectively. As of December 31, 1994, there was no
debt outstanding under either credit facility. 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 1994 was 4.72%. The loan agreements place certain
restrictions on the amount of capital which must be maintained by the Company.
On December 31, 1994, the Company's capital exceeded the most restrictive
covenants of both agreements.
Note 9
INCOME TAXES
The provision for income taxes reflected in the statement of income was
comprised of the following components:
1994 1993 1992
Currently Payable:
Federal $2,893,317 $2,846,900 $2,903,663
State 397,853 387,129 404,207
Deferred:
Federal 87,154 59,198 (129,880)
State 14,147 15,387 (13,649)
Total $3,392,471 $3,308,614 $3,164,341
The net deferred tax asset and liability and the temporary differences
comprising those balances at December 31, 1994 and 1993, are as follows:
1994 1993
Deferred Tax Asset:
Allowance for Loan Losses $2,842,496 $2,857,660
Deferred Loan Fees 337,532 313,883
Unrealized Losses on Investment Securities 497,411 -
Stock Incentive Plan 205,690 -
Writedown of Real Estate Held for Sale 37,622 22,495
Other 140,141 72,369
Total Deferred Tax Asset $4,060,892 $3,266,407
Deferred Tax Liability:
Premises and Equipment 845,168 839,327
Employee Benefits 374,046 235,616
FDIC Premiums 254,132 -
Other 30,011 30,039
Total Deferred Tax Liability 1,503,357 1,104,982
Net Deferred Tax Asset $2,557,535 $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:
1994 1993 1992
Computed Tax Expense $4,154,045 $4,092,519 $3,923,898
Increases (Decreases)
Resulting From:
Tax-Exempt Interest Income (1,079,682) (1,087,346) (1,001,370)
State Income Taxes,
Net of Federal Income
Tax Benefits 271,920 265,660 257,768
Other 46,188 37,781 (15,955)
Actual Tax Expense $3,392,471 $3,308,614 $3,164,341
The items that caused timing differences and the resulting deferred income taxes
for 1992, were as follows:
1992
Asset Writedowns $(137,520)
Provision for Loan Losses 30,736
Deferred Loan Fees (21,088)
Pension Expense 178,259
Depreciation (75,646)
Other (118 270)
Total $(143,529)
Note 10
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.
1994 1993 1992
Components of Pension
Expense:
Service Cost $ 763,581 $685,449 $674,980
Interest Cost 847,555 845,301 763,211
Actual Return on Plan Assets (317,556) (525,422) (363,931)
Net Amortization and Deferral (405,608) (330,861 (492,809)
Total $887,972 $674,467 $581,451
Actuarial Present Value of
Projected Benefit Obligations:
Accumulated Benefit Obligations:
Vested $6,860,413 $6,896,007 $ 5,833,309
Nonvested 1,097,247 1,066,503 935,972
$7,957,660 $7,962,510 $ 6,769,281
Plan Assets at Fair Value
(primarily listed stocks and
bonds, U.S. Government secur-
ities and interest bearing
deposits) $12,156,448 $10,898,324 $10,144,450
Projected Benefit Obligation (11,672,264) (11,824,763) (10,616,298)
Plan Assets in Excess of
Projected Benefit Obligation 484,184 (926,439) (471,848)
Unrecognized Net Loss 2,186,862 3,465,697 2,926,291
Unrecognized Net Asset (1,648,241) (1,884,324) (2,120,407)
Prepaid Pension Cost $1,022,805 $ 654,934 $ 334,036
Major Assumptions:
Discount Rate 8.25% 7.50% 8.00%
Rate of Increase in
Compensation Levels 5.50% 5.50% 6.00%
Expected Long-Term Rate
of Return on Plan Assets 7.50% 7.50% 8.50%
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
was approximately $258,000 and $354,000 in 1994 and 1993, respectively.
Note 11
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 $242,500, $266,000, and $286,000 during 1994, 1993 and 1992,
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 $53,000, to be
adjusted for inflation in future years.
At December 31, 1994 and 1993, certain officers and directors were indebted to
the Company's bank subsidiaries in the aggregate amount of $9,882,658 and
$8,664,857, respectively. During 1994, $11,673,788 in new loans were made and
repayments totalled $10,455,987. These loans were made on the same terms as
loans to other individuals of comparable creditworthiness.
Note 12
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
bank's net profits (as defined) for that year combined with its retained net
profits for the preceding two calendar years. In 1995, the subsidiaries may
declare dividends without regulatory approval of $8.3 million plus an additional
amount equal to the net profits of the Company's subsidiary banks for 1995 up to
the date of any such dividend declaration.
Note 13
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.
1994 1993 1992
Noninterest Income:
Merchant Fee Income $1,746,921 $1,127,050 $1,138,387
Noninterest Expense:
Employee Insurance 931,668 954,397 887,618*
Payroll Taxes 927,288 879,249 802,370*
Maintenance and Repairs 1,311,865 1,274,555 1,243,497
Professional Fees 667,353 659,414 468,418*
Advertising 705,753 658,696 438,655*
Printing & Supplies 1,128,978 1,065,122 875,023
Telephone 700,483 560,939* 455,055*
Insurance (including FDIC Premium) 1,756,415 1,708,134 1,490,156
Commission/Service Fees 1,065,346 579,673* 583,487*
*Less than 1% of operating income in the year reported.
Note 14
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, 1994, the amounts associated with the Company's
off-balance-sheet obligations were as follows:
Amount
Commitments to Extend Credit(1) $102,034,183
Standby Letters of Credit 1,867,127
(1) Commitments include unfunded loans, revolving lines of
credit (including credit card lines) and other unused
commitments.
Commitments to extend credit are agreements to lend to a customer so long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
Standby letters of credit are conditional commitments issued by the 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 counterpart. 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, 1994 approximately 66% of the Company's loan
portfolio consisted of real estate related loans.
Note 15
FAIR VALUE OF FINANCIAL INSTRUMENTS
Many of the Company's assets and liabilities are short-term financial
instruments whose carrying values approximate fair value. These items include
Cash and Due From Banks, Interest Bearing Balances with Other Banks, Federal
Funds Sold, Federal Funds Purchased and Securities Sold Under Repurchase
Agreements, and Other Short-term Borrowings. In cases where quoted market
prices are not available, fair values are based on estimates using present value
or other valuation techniques. The resulting fair values may be significantly
affected by the assumptions used, including the discount rates and estimates of
future cash flows.
The methods and assumptions used to estimate the fair value of the Company's
other financial instruments are as follows:
Investment Securities - Fair values for investment securities are based on
quoted market prices. If a quoted market price is not available, fair value is
estimated using market prices for similar securities.
Loans - The loan portfolio is segregated into categories and the fair value
of each loan category is calculated using present value techniques based upon
projected cash flows and estimated discount rates. The calculated present values
are then reduced by an allocation of the allowance for loan losses against each
respective loan category.
Deposits - The fair value of Noninterest Bearing Deposits, NOW Accounts,
Money Market Accounts and Savings Accounts are the amounts payable on demand at
the reporting date. The fair value of fixed maturity certificates of deposit is
estimated using 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.
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.
At December 31,
1994 1993
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
Investment Securities $199,288 $193,850 $218,623 $221,274
Loans, Net of Allowance
for Loan Losses 413,253 405,899 391,830 394,171
Financial Liabilities:
Deposits 648,174 646,354 662,745 663,665
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 16
PARENT COMPANY FINANCIAL INFORMATION
The following is a condensed statement of financial condition of the parent
company at December 31:
Parent Company Statements of Financial Condition
1994 1993
ASSETS
Cash and Due from Group Banks $ 2,820,449 $ 2,788,987
Investment in Group Banks 72,441,604 68,733,692
Other Assets 351,150 358,919
Total Assets $75,613,203 $71,881,598
LIABILITIES
Dividends Payable $ 2,276,652 $ 2,134,240
Long-Term Debt (Note 8) - 1,900,000
Other Liabilities 936,459 707,603
Total Liabilities 3,213,111 4,741,843
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value; 4,000,000
shares authorized; 3,105,243 issued 31,052 31,052
Surplus 5,852,157 5,856,794
Retained Earnings 73,989,093 67,753,475
Treasury Stock: 259,428 shares in 1994
and 255,927 shares in 1993, at cost (6,587,956) (6,501,566)
Net Unrealized Loss on Available for
Sale Securities held by Group Banks (884,254) --
Total Shareholders' Equity 72,400,092 67,139,755
Total Liabilities and Shareholders' Equity $75,613,203 $71,881,598
The accompanying Notes to Financial Statements are an integral part of these
statements.
The operating results of the parent company for the three years ended December
31, are shown below:
Parent Company Statements of Income
1994 1993 1992
OPERATING INCOME
Income Received from Group Banks:
Dividends (Note 12) $4,615,000 $4,675,000 $4,800,000
Group Overhead Fees 2,310,980 1,985,566 2,017,566
Total Operating Income 6,925,980 6,660,566 6,817,566
OPERATING EXPENSE
Salaries and Employee Benefits 1,564,825 1,617,059 1,138,963
Legal Fees 74,357 63,458 47,936
Professional Fees 156,883 171,291 137,393
Advertising 594,391 432,978 304,886
Travel and Entertainment 72,057 62,481 49,783
Amortization of Excess of Purchase Price
Over Book Value of Net Assets Acquired 52,025 51,617 56,818
Interest on Debt 53,703 56,009 178,619
Dues and Memberships 49,150 41,601 44,598
Other 360,642 180,176 239,705
Total Operating Expense 2,978,033 2,676,670 2,198,701
Income Before Income Taxes and Equity
in Undistributed Earnings of Group Banks 3,947,947 3,983,896 4,618,865
Income Tax Benefit (233,171) (229,736) (81,497)
Income Before Equity in Undistributed
Earnings of Group Banks 4,181,118 4,213,632 4,700,362
Equity in Undistributed Earnings
of Group Banks 4,644,191 4,030,079 3,676,174
Net Income $8,825,309 $8,243,711 $8,376,536
The cash flows for the parent company for the three years ended December 31 were
as follows:
Parent Company Statements of Cash Flows
1994 1993 1992
Net Income $8,825,309 $8,243,711 $8,376,536
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Equity in undistributed
Earnings of Group Banks (4,644,191) (4,030,079) (3,676,174)
Amortization of Excess of Purchase
Price Over Book Value of Net
Assets Acquired 52,025 51,038 56,818
(Increase) Decrease in Other Assets 3,132 (187,857) 163,945
Net Increase (Decrease) in
Other Liabilities 228,856 332,613 (54,215)
Net Cash from Operating Activities (4,465,131) (4,409,426) 4,866,910
Cash Flows from Financing Activities:
Addition to Long-Term Debt - 1,400,000 -
Repayment of Long-Term Debt (1,900,000) (1,500,000) (2,000,000)
Payment of Dividends (2,447,279) (2,282,200) (2,153,230)
Sale (Purchase) of Treasury Stock, Net (86,390) (1,845,988) (648,000)
Net Cash from Financing Activities (4,433,669) (4,228,188) (4,801,230)
Net Increase (Decrease) in Cash 31,462 181,238 65,680
Cash at Beginning of Period 2,788,987 2,607,749 2,542,069
Cash at End of Period $2,820,449 $ 2,788,987 $2,607,749
Note 17
CORPORATE REORGANIZATION
On July 25, 1994, Capital City First National Bank, Capital City Second National
Bank, Industrial National Bank, City National Bank, Havana State Bank, First
National Bank of Jefferson County and Gadsden National Bank, each being wholly-
owned subsidiaries of Capital City Bank Group, Inc., entered into a "Plan of
Merger and Merger Agreement" under which the six national banks where merged
into and with Havana State Bank, a state banking corporation. The effective
date of the merger was January 1, 1995. Simultaneous with the merger, the
name and headquarters was changed from Havana State Bank, Havana, Florida to
Capital City Bank, Tallahassee, Florida. Capital City Bank is a member of the
Federal Reserve Bank of Atlanta and is insured by the Federal Deposit Insurance
Corporation. Following consummation of the merger, Capital City Bank has 20
banking locations and represents approximately 82% of the Company's total
assets. The operating results for 1994 include pre-tax charges of $731,000
which are attributable to corporate reorganization.
Net Income and Balance Sheet Information By Bank (Unaudited)
First
National Levy Farmers &
First City Industrial Second Gadsden Havana Bank of CAPITAL County Merchants Branford
National National National National National State Jefferson CITY State Bank of State
Bank Bank Bank Bank Bank Bank County BANK Bank Trenton Bank
(Dollars In Thousands)
1994 PRO FORMA 7,337
For the Year: 1994 4,042 731 814 712 278 478 282 1,000 503 419
Net Income 1993 4,002 590 784 812 271 370 259 777 477 364
1992 3,680 674 872 858 206 364 218 881 411 310
At December 31st:
Loans,
Net of 1994 PRO FORMA 342,606
Unearned 1994 196,936 37,150 29,929 29,501 21,248 15,916 11,926 42,343 20,021 15,834
Interest 1993 177,409 38,771 29,415 29,560 21,558 16,290 10,269 43,366 19,498 13,288
1992 148,533 39,774 31,981 28,811 21,937 15,423 9,899 43,147 11,722 15,423
1994 PRO FORMA 611,923
Assets 1994 346,218 77,898 57,884 51,137 40,265 28,561 23,932 71,004 33,457 28,953
1993 352,431 76,391 57,971 56,659 40,357 29,209 22,380 75,583 32,950 30,181
1992 291,849 73,065 58,649 50,923 43,041 30,239 21,108 77,283 23,300 30,239
Noninterest
Bearing 1994 PRO FORMA 152,450
Deposits 1994 106,190 19,303 14,106 12,849 5,156 4,930 3,888 11,104 5,903 4,897
1993 104,481 19,114 13,084 18,641 4,416 4,407 3,906 9,782 5,049 4,407
1992 95,894 15,165 12,948 11,669 4,865 3,870 2,866 8,862 4,459 3,870
Interest 1994 PRO FORMA 383,991
Bearing 1994 195,464 51,208 37,069 32,917 29,837 20,500 16,996 51,983 23,749 20,740
Deposits 1993 195,712 50,623 38,393 32,842 30,842 21,916 15,901 57,835 24,553 22,143
1992 151,683 50,424 39,413 34,432 33,128 23,532 15,813 60,705 24,430 16,066
Shareholders' 1994 PRO FORMA 57,607
Equity 1994 29,341 6,620 6,565 5,188 4,610 3,027 2,256 7,497 3,537 3,036
1993 27,891 6,150 6,322 4,996 4,524 2,789 2,094 7,060 3,317 2,774
1992 25,890 5,860 6,088 4,684 4,403 2,645 1,935 6,783 3,091 2,509
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
The Board of Directors has appointed Arthur Andersen LLP, independent
certified public accountants, as independent auditors for Capital City Bank
Group, Inc., and its subsidiaries for the current fiscal year ending December
31, 1995, subject to ratification by the shareholders. Fiscal 1995 will be the
second year Arthur Andersen LLP 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 LLP was made by the Company's Board of
Directors on January 21, 1994. Arthur Andersen LLP 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. or Arthur Andersen LLP 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, Compensation and Other Information" in the
Registrant's Proxy Statement dated April 7, 1995, to be filed on or before April
7, 1995.
Item 11. Executive Compensation
Incorporated herein by reference to the section entitled "Executive Officers,
Compensation and Other Information" in the Registrant's Proxy Statement dated
April 7, 1995, to be filed on or before April 7, 1995.
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,
1995, to be filed on or before April 7, 1995.
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 Officers, Compensation and Other Information" in the Registrant's
Proxy Statement dated April 7, 1995, to be filed on or before April 7, 1995.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
EXHIBITS
*2 Merger Agreement and Plan of Merger dated July 25, 1995, by and among
Capital City First National Bank, Capital City Second National Bank, Industrial
National Bank, City National Bank, Havana State Bank, First National Bank of
Jefferson County and Gadsden National Bank
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).
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(b)(1) 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(b)(2) Letter of Modification to Master Note and Loan and Security Agreement
in Item 10(b) above, with an effective date of June 17, 1993.
*10(b)(3) Amendment to Master Note and Loan and Security Agreement in Item 10(b)
above, dated July 25, 1994.
10(c) 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.
10(d) Capital City Bank Group, Inc. 1995 Associate Stock Purchase Plan is
incorporated herein by reference to Exhibit A of the Registrant's 1995 Proxy
Statement dated April 7, 1995.
22 For a listing of Capital City Bank Group's subsidiaries see Item I.
*These exhibits will be filed as an amendment to this Form 10K.
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 1994.
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
20, 1995, on its behalf by the undersigned, thereunto duly authorized.
CAPITAL CITY BANK GROUP, INC.
/s/ William G. Smith
President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 20, 1995, by the following persons in the
capacities indicated.
/s/ WILLIAM G. SMITH
William G. 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
DuBose Ausley
/s/ Thomas A. Barron
Thomas A. Barron
/s/ Cader B. Cox, III
Cader B. Cox, III
/s/ John K. Humphress
John K. Humphress
/s/ Payne H. Midyette, Jr.
Payne H. Midyette, Jr.
/s/ Godfrey Smith
Godfrey Smith
/s/ William G. Smith, Jr.
William G. Smith, Jr.