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1995 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, 1995
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, 1996, Capital City Bank Group, Inc. had 3,105,243 shares of
common stock issued and 2,862,284 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 4, 1996, was approximately $41,895,072.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report to shareholders for the fiscal
year ended December 31, 1995 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 1995 ON FORM 10-K
TABLE OF CONTENTS
PART I PAGE
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 10
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 12
Item 8. Financial Statements and Supplementary Data 39
Item 9. Changes in and Disagreement with Accountants on Accounting
and Financial Disclosure 60
PART III
Item 10. Directors and Executive Officers of the Registrant 61
Item 11. Executive Compensation 61
Item 12. Security Ownership of Certain Beneficial Owners and
Management 61
Item 13. Certain Relationships and Related Transactions 61
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 62
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.
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. The new structure allows the Company to present a consistent image
to a broader market and to better serve its 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 December 31, 1995, Capital City Bank had assets totalling $669.7
million, which constituted approximately 82% of the Company's total
consolidated assets. Capital City Bank earned $7.7 million for the year
ended December 31, 1995 which represented approximately 81% of the
Company's consolidated earnings. See page 60 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, 199 5 Growth Rate
(000's Omitted)
*Capital City Bank January 1, 1995 * $578,469 5.5%
Tallahassee, Florida
Levy County State Bank September 18, 1948 January 1, 1985 68,958 2.3%
Chiefland, Florida
Farmers & Merchants October 18, 1911 February 1, 1986 32,339 1.9%
Bank of Trenton
Trenton, Florida
Branford State Bank March 13, 1911 July 31, 1989 28,336 10.2%
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 December 10, 1995, the Company executed an Agreement and Plan of Merger
to acquire First Financial Bancorp, Inc., ("FFB") for $22.00 per share in
cash, or a total purchase price of approximately $20.3 million. First
Financial is a $230 million federal savings bank headquartered in
Tallahassee, Florida, with six offices located in five Florida counties.
It is anticipated the transaction will close during the second half of
1996, expanding the number of counties served by the Company from seven to
eleven and increasing the number of offices from thirty to thirty-five.
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 503 (full-time equivalent) employees at March 1,
1996. In management's opinion, the Company enjoys a satisfactory
relationship with its employees. Pages 10-60 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, retail brokerage
services and a broad range of other financial services to corporate and
individual customers, governmental bodies and correspondent banks. As of
March 1, 1996, 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 "QuickBucks" 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 totaled $458 million at December 31, 1995, of which $116
million represented assets under management.
Brokerage Services
During the fourth quarter of 1995, the Company began offering retail
investment products. These products are offered under the name of The Wall
Street Corner which is a service of Liberty Securities Corporation, a
registered broker/dealer and member of NASD/SIPC. The securities unit is a
wholly-owned subsidiary (Capital City Securities, Inc.) of Capital City
Bank, and its brokers are licensed through Liberty Securities Corporation.
The Wall Street Corner offers a full line of retail securities products,
including U.S. Government bonds, tax-free municipal bonds, stocks, mutual
funds and unit investment trusts.
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 consist 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 totaled $440.0 million, or 62.9%, of the
Company's consolidated deposits at December 31, 1995.
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)
1995 1994 1993
Capital City Bank:
Citrus County 4.6% 3.6% 3.4%
Gadsden County 28.2% 30.4% 32.3%
Jefferson County 27.6% 27.6% 28.2%
Leon County 22.2% 24.0% 23.4%
Levy County State Bank 33.7% 33.8% 34.3%
Farmers & Merchants Bank of Trenton 53.7% 55.4% 56.0%
Branford State Bank 16.3% 14.5% 14.8%
(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, 1995.
Number of Number of Commercial
County Commercial Banks Bank Offices
Citrus 10 31
Gadsden 4 9
Gilchrist 2 4
Jefferson 2 2
Leon 12 60
Levy 4 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 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 are
permitted to acquire banks in any state. State laws prohibiting interstate
banking or discriminating against out-of-state banks are 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 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 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 with 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 former 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.
Prior to the enactment of the Interstate Banking Act, Florida enacted the
Florida Reciprocal Banking Act (the "Florida Act") which took 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 and interstate branching
is expressly prohibited. The Interstate Banking Act, however, will negate
Florida's prohibition on branching unless Florida expressly opts out of the
Interstate Banking Act's branching provisions. Legislation is currently
pending in the Florida Legislature which would provide for Florida to opt
in to such branching provisions.
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,
1995. 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.
Under federal law, BIF is statutorily required to be recapitalized to a
1.25% of insured reserve deposits ratio. In view of the BIF's achieving
the 1.25% ratio during 1995, the FDIC reduced the assessments for most
banks by adopting a new assessment rate schedule of 4 to 31 basis points
for BIF deposits. This schedule applied to the second half of 1995. Under
the schedule, approximately 91% of BIF members paid the lowest assessment
rate of 4 basis points. Most recently, the FDIC has voted to further
reduce the BIF assessment schedule by an additional four basis points for
the first half of calendar year 1996 so that most BIF members will pay the
statutory minimum semiannual assessment of $1,000. Based on notices from
the regulators in late 1995, in the first half of 1996 the Company's
banking subsidiaries will pay an assessment of $1,000, the lowest amount
payable by an insured depository institution.
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 merge BIF and the Savings Association Insurance Fund, to
require savings associations to become banks, to alter the statutory
separation of commercial and investment banking and to further expand the
powers of banks, bank holding companies and competitors of banks. It
cannot be predicted whether or in what form any of these proposals will be
adopted or the extent to which the business of 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 1995 totaled approximately $53,000.
As of March 1, 1996 the Company had 30 banking locations. Of the 30
locations, the Company leases either the land or buildings (or both) at 4
locations and owns the land and buildings at the remaining 26.
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 $26.00 to $33.00 per share
for the two-year period ended December 31, 1995, with the most recent
trades at $33.00 per share.
Item 6. Selected Financial And Other Data
For the Years Ended December 31,
1995 1994 1993 1992 1991
(Dollars in Thousands, Except Per Share Data)
Interest Income $ 54,477 $ 47,891 $ 46,395 $ 48,306 $54,801
Net Interest Income 33,989 33,166 31,555 29,775 28,195
Provision for Loan Losses 293 1,246 960 1,216 1,817
Income Before Accounting
Change 9,522 8,825 8,728 8,376 7,272
Net Income 9,522 8,825 8,244 8,376 7,272
Per Common Share:
Income Before
Accounting Change $ 3.34 $ 3.10 $ 2.99 $ 2.86 $ 2.46
Net Income 3.34 3.10 2.82 2.86 2.46
Cash Dividends Declared 1.00 .91 .83 .78 .73
Book Value 28.44 25.44 23.56 21.59 19.55
Based on Net Income:
Return on Average Assets
Before Accounting Change 1.25% 1.18% 1.21% 1.27% 1.15%
Return on Average Assets 1.25 1.18 1.14 1.27 1.15
Return on Average Equity
Before Accounting Change 12.32 12.51 13.15 13.71 13.07
Return on Average Equity 12.32 12.51 12.43 13.71 13.07
Dividend Payout Ratio 29.94 29.34 29.44 27.25 29.65
Averages for the Year:
Loans, Net of Unearned
Interest $432,313 $406,873 $381,807 $358,876 $368,555
Earning Assets 681,186 666,919 651,042 598,127 571,165
Assets 763,697 745,334 722,286 662,150 633,963
Deposits 657,384 647,254 630,324 573,162 546,291
Long-Term Debt 71 1,144 1,381 3,156 5,555
Shareholders' Equity 77,259 70,563 66,328 61,078 55,635
Year-End Balances:
Loans, Net of Unearned
Interest $443,973 $420,804 $399,424 $369,911 $364,773
Earning Assets 716,170 645,832 675,273 619,929 568,720
Assets 813,659 742,630 762,335 686,966 639,540
Deposits 699,579 648,174 662,745 597,497 555,092
Long-Term Debt 1,982 - 1,900 2,000 4,000
Shareholders' Equity 81,158 72,400 67,140 63,169 57,723
Equity to Assets Ratio 9.97% 9.75% 8.81% 9.20% 9.03%
Other Data:
Average Shares
Outstanding 2,853,234 2,847,492 2,924,022 2,932,123 2,958,920
Shareholders of Record* 933 761 754 748 731
Banking Locations* 30 29 30 27 27
Full-Time Equivalent
Employees* 503 489 476 466 469
*As of March 1st of the following year.
Item 7. Management's Discussion and Analysis of Financial Codition 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 1995 compares
with prior years. Throughout this section, Capital City Bank Group, Inc.,
and its subsidiaries, collectively, are referred to as "CCBG" or the
"Company". The subsidiaries, collectively, are referred to as Group
Banks.
On January 1, 1995, the Company completed a corporate reorganization
whereby seven of the Company's ten banking subsidiaries were merged to form
one bank. The new bank, Capital City Bank, is headquartered in Tallahassee
and has twenty-one offices covering four counties. See Note 17 in the Notes
to Consolidated 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.
On December 10, 1995, the Company executed an Agreement and Plan of Merger
to acquire First Financial Bancorp, Inc., ("FFB") for $22.00 per share in
cash, or a total purchase price of approximately $20.3 million. First
Financial is a $230 million federal savings bank headquartered in
Tallahassee, Florida, with six offices located in five Florida counties.
It is anticipated the transaction will close during the second half of
1996, expanding the number of counties served by the Company from seven to
eleven and increasing the number of offices from thirty to thirty-five.
EARNINGS ANALYSIS
In 1995, the Company's earnings were $9.5 million, or $3.34 per share. This
compares to earnings of $8.8 million, or $3.10 per share in 1994, and $8.2
million, or $2.82 per share in 1993. The earnings in 1993 were impacted by
the adoption of Statement of Financial Accounting Standards No. 109
("Accounting for Income Taxes"), which resulted in a one-time, non-cash
charge of $484,000, or $.17 per share.
On a per share basis, earnings increased 7.7% in 1995 versus 9.9% in 1994.
Growth in operating revenues and a reduction in the provision for loan
losses were significant factors which contributed to stronger earnings in
1995. 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, Except Per Share Data)
For the Years Ended December 31,
1995 1994 1993
Interest Income $54,477 $47,891 $46,395
Taxable Equivalent Adjustments 1,591 1,657 1,663
Total Interest Income 56,068 49,548 48,058
Interest Expense 20,488 14,725 14,840
Net Interest Income 35,580 34,823 33,218
Provision for Loan Losses 293 1,246 960
Taxable Equivalent Adjustments 1,591 1,657 1,663
Net Interest Income After Provision
for Loan Losses 33,696 31,920 30,595
Noninterest Income 13,170 13,009 12,478
Noninterest Expense 33,466 32,711 31,036
Income Before Income Taxes 13,400 12,218 12,037
Income Taxes 3,878 3,393 3,309
Income Before Accounting Change 9,522 8,825 8,728
Cumulative Effect of Accounting Change - - (484)
Net Income $ 9,522 $ 8,825 $ 8,244
Income Per Share Before Accounting Change $ 3.34 $ 3.10 $ 2.99
Net Income Per Share $ 3.34 $ 3.10 $ 2.82
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 1995, taxable-equivalent net interest income increased $757,000, or
2.2%. This follows an increase of $1.6 million, or 4.8% in 1994, and $1.9
million, or 5.9% in 1993. During 1995, higher levels of earning assets and
growth in the loan portfolio 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)
1995 1994 1993
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
Assets:
Loans, Net of Unearned
Interest (1)(2) $432,313 $40,872 9.45% $406,873 $35,516 8.73% $381,807 $ 33,579 8.79%
Taxable Investment
Securities 139,936 7,966 5.69% 146,789 7,271 4.95% 139,875 7,395 5.29%
Tax-Exempt Investment
Securities (2) 70,773 4,989 7.05% 71,683 5,092 7.10% 65,256 5,130 7.86%
Funds Sold 38,164 2,241 5.87% 41,574 1,669 4.02% 64,104 1,954 3.05%
Total Earning Assets 681,186 56,068 8.23% 666,919 49,548 7.43% 651,042 48,058 7.38%
Cash & Due From Banks 49,075 46,445 45,536
Allowance for Loan Losses (7,374) (7,766) (7,641)
Other Assets 40,810 39,736 33,349
TOTAL ASSETS $763,697 $745,334 $722,286
Liabilities:
NOW Accounts $ 91,060 $1,806 1.98% $ 92,957 $ 1,809 1.95% $ 78,119 $ 1,617 2.09%
Money Market Accounts 70,188 2,108 3.00% 76,173 1,731 2.27% 80,036 l,779 2.24%
Savings Accounts 85,408 1,942 2.27% 107,741 2,597 2.41% 113,850 2,953 2.59%
Other Time Deposits 249,827 13,526 5.41% 214,068 7,853 3.67% 208,729 7,864 3.77%
Total Interest
Bearing Deposits 496,483 19,382 3.90% 490,939 13,990 2.85% 480,734 14,213 2.96%
Funds Purchased 19,308 1,053 5.45% 18,291 650 3.55% 17,765 548 3.08%
Other Short-Term
Borrowings 1,159 49 4.23% 844 31 3.67% 1,069 23 2.18%
Long-Term Debt 71 4 5.63% 1,144 54 4.72% 1,381 56 4.06%
Total Interest
Bearing Liabilities 517,021 20,488 3.96% 511,218 14,725 2.88% 500,949 14,840 2.97%
Noninterest Bearing
Deposits 160,901 156,315 149,590
Other Liabilities 8,516 7,238 5,419
TOTAL LIABILITIES 686,438 674,771 655,958
Shareholders' Equity:
Common Stock 31 31 31
Additional Paid
In Capital 5,867 5,852 5,857
Retained Earnings 71,361 64,680 60,440
TOTAL SHAREHOLDERS'
EQUITY 77,259 70,563 66,328
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $763,697 $745,334 $722,286
Interest Rate Spread 4.27% 4.55% 4.41%
Net Interest Income $35,580 $ 34,823 $ 33,218
Net Interest Margin (3) 5.22% 5.22% 5.10%
(1) Average balances include nonaccrual loans. Interest income includes fees on
loans of approximately $1,469,000, $1,619,000 and $1,610,000 in 1995, 1994, and
1993, 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)
1995 Change From 1994 1994 Change From 1993
Due To Average Due To Average
Total Volume Rate Total Volume Rate
Earning Assets:
Loans, Net of Unearned Interest(2) $5,356 $2,221 $3,135 $ 1,936 $2,204 $(268)
Investment Securities:
Taxable 695 (339) 1,034 (124) 365 (489)
Tax-Exempt (2) (103) (65) (38) (37) 505 (542)
Funds Sold 572 (137) 709 (285) (687) 402
Total 6,520 1,680 4,840 1,490 2,387 (897)
Interest Bearing Liabilities:
NOW Accounts (3) (37) 34 192 310 (118)
Money Market Accounts 377 (136) 513 (48) (87) 39
Savings Accounts (655) (538) (117) (355) (158) (197)
Other Time Deposits 5,673 1,312 4,361 (12) 201 (213)
Funds Purchased 403 36 367 102 16 86
Other Short-Term Borrowings 18 10 8 8 (5) 13
Long-Term Debt (50) (50) - (2) (10) 8
Total 5,763 597 5,166 (115) 267 (382)
Change in Net Interest Income $ 757 $l,083 $(326) $1,605 $2,120 $(515)
(1) This table shows the change in net interest income for comparative periods
based on either changes in average volume or changes in average rates for
earning assets and interest bearing liabilities. Changes which are not solely
due to volume changes or solely due to rate changes have been attributed to
rate.
(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 several years began increasing in early
1994 and peaked during the first quarter of 1995. During this fifteen
month period, the prime rate rose from 6% to 9% and the federal funds rate
increased from approximately 3% to 6%. Subsequent to the first quarter of
1995, however, rates declined. The prime rate fell from 9.0% to 8.5% at
December 31, 1995, and the federal funds rate declined from 6.0% to 5.5%.
Although rates fell during the latter half of the year, the current
interest rate environment is still well above that of early 1994.
The Company's taxable equivalent yield on average earning assets of 8.23%
represents an 80 basis point increase over 1994, compared to only a five
basis point improvement in 1994 over 1993. The higher yield in 1995 is
reflective of 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 58.9% in the
first quarter of 1994 to 63.4% in the fourth quarter of 1995. The lower
yields on earning assets in 1994 and 1993 are reflective of the interest
rate environment during those years and a less favorable mix of earning
assets.
The average rate paid on interest bearing liabilities in 1995 was 3.96%
versus 2.88% in 1994 and 2.97% in 1993. The increase is attributable to
higher interest rates and a less favorable deposit mix. As interest rates
increased in 1994 and early 1995, depositors sought higher yields by
investing in certificates of deposits versus non-maturity deposits such as
money market and savings accounts. The increase also reflects the results
of promotions during the year in which the Company raised in excess of $30
million in certificates of deposit. As certificates of deposit generally
represent a higher cost deposit product, this shift in depositor preference
increased the Company's cost of funds. Certificates of deposit as a
percent of total deposits increased from 32.1% in the first quarter of 1994
to 38.9% in the fourth quarter of 1995. In prior years, the lower average
rates are reflective of lower interest rates and a more favorable deposit
mix.
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) decreased 28 basis points in 1995 and increased 14 basis
points in 1994. The reduction in spread in 1995 is attributable to the
higher cost of funds.
The Company's net interest margin (defined as taxable equivalent interest
income less interest expense divided by average earning assets) was 5.22%
in 1995, compared to 5.22% in 1994, and 5.10% in 1993. Although the
Company experienced an increase in its cost of funds during 1995, the
increase in interest income was sufficient to enable the Company to
maintain its margin of 5.22%. The increase in 1994 over 1993 is
attributable to an improved spread and a reduction in the volume of earning
assets funded through interest bearing liabilities.
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 $293,000 in 1995 versus $1.2 million in
1994 and $960,000 in 1993. The reduction in the provision over prior years
reflects improved credit quality and a relatively low level of charge-offs.
At December 31, 1995, the allowance for loan losses totaled $6.5 million
compared to $7.6 million in 1994 and $7.6 million in 1993. 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
information regarding the allowance for loan losses. Selected loss
coverage ratios are presented below:
1995 1994 1993
Provision for Loan Losses as a
Multiple of Net Charge-offs .2x 1.0x 1.0x
Pre-tax Income Plus Provision
for Loan Losses as Multiple
of Net Charge-offs 10.0x 10.4x 13.7x
Noninterest Income
Noninterest income increased $161,000, or 1.2%, in 1995 compared with
$531,000, or 4.3%, in 1994. Factors affecting noninterest income are
discussed below.
Service charges on deposit accounts increased $241,000, or 4.5%, in 1995,
compared to a decrease of $193,000, or 3.4%, in 1994. 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 $174,000, or 7.1%, in 1995 versus an
increase of $54,000, or 2.3%, in 1994. The data processing center provides
computer services to both financial and non-financial clients in North
Florida and South Georgia. In recent years, a significant portion of the
growth in revenues has been provided by processing for clients other than
financial institutions. Processing revenues for non-financial entities
represented approximately 52% of the total processing revenues in 1995.
In 1995, trust fees increased $262,000, or 38.5%. In January 1995, the
Company changed its method of income recognition for Capital City Trust
Company ("CCTC") from cash to accrual. This change in method resulted in a
one-time adjustment which increased CCTC revenues by $166,000 during the
first quarter of 1995. The remaining increase in fees of approximately
$96,000 is attributable to the growth in assets under management which grew
$12.6 million, or 12.2%. Assets under management totaled $116.0 million at
December 31, 1995. Trust fees increased $37,000, or 5.8%, in 1994,
attributable to growth in assets under management.
Net gains from the sale of securities recognized during 1995 were not
material. 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 1995 and 1994 were related to the redemption of principal
from mortgage-backed securities and bonds which were called during the
year.
Other noninterest income decreased $671,000, or 14.5%, in 1995 versus an
increase of $808,000, or 21.1% in 1994. The decrease in 1995 is
attributable to real estate gains recognized in 1994 and a reduction in
mortgage origination fees. During 1994, the Company recognized gains on
the sale of real estate (including other real estate and bank premises)
totaling $827,000, compared to $94,000 in 1995. Mortgage origination
volume declined $9.4 million, or 27.0% in 1995, resulting in a reduction in
mortgage fees of $220,000, or 30.8%. These reductions in income were
partially offset by a $295,000 increase in credit card income which was
primarily attributable to higher volume. The primary factors impacting the
increase in noninterest income in 1994 as compared to 1993 were gains on
the sale of real estate of $827,000, an increase in credit card fees of
$290,000 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. While
several factors impacted credit card fees, the majority of the increase in
1994 is attributable to volume. Mortgage loan origination volume fell from
$55.5 million in 1993 to $34.8 million in 1994, contributing to the 38%
decline in origination fees.
Noninterest income as a percent of average earning assets represented 1.93%
in 1995 compared to 1.95% in 1994 and 1.92% in 1993.
Noninterest Expense
Total noninterest expense for 1995 was $33.5 million, an increase of
$755,000, or 2.3%, over 1994, compared with an increase of $1.7 million, or
5.4% in 1994 over 1993. Factors impacting the Company's noninterest expense
during 1995 and 1994 are discussed below.
The Company's compensation expense totaled $18.0 million, an increase of
$872,000, or 5.1%, over 1994. Salaries increased $530,000, or 3.8%, due to
normal annual raises. Employee insurance and expenses associated with the
Company's stock incentive plan accounted for the remaining increase of
$342,000. Stock compensation expense in 1995 was $424,000 compared to
$258,000 in the prior year. In 1994, compensation expense totaled $17.1
million, an increase of $904,000, or 5.6%, over 1993. Salaries and wages
increased $732,000, or 4.5%, 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 resulted in higher pension expense.
Occupancy expense (including furniture, fixtures & equipment) was up by
$631,000, or 12.0% in 1995. The increase is attributable to higher
depreciation expense which increased $447,000 and maintenance and repairs
which increased $195,000. In 1994, occupancy expense was up $161,000, or
3.2%. 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 increase.
Other noninterest expense decreased $748,000, or 7.2%, in 1995, compared to
an increase of $610,000, or 6.3%, in 1994. The decrease in 1995 is
primarily attributable to a reduction in FDIC insurance premiums and
corporate reorganization expenses. Effective June 1, 1995, the Federal
Deposit Insurance Corporation reduced deposit insurance premiums from $.23
per $100 in deposits to $.04 per $100. This resulted in a reduction of
premiums for 1995 of $700,000. For 1996, insurance premiums have been
completely eliminated which will result in additional savings to the
Company of approximately $240,000 based on the current level of deposits.
Corporate reorganization expenses incurred in 1994 totaled $731,000 and
thus the elimination of these expenses in 1995 contributed to the overall
expense reduction in this category. The increase in 1994 of $610,000 is
primarily attributable to expenses associated with the corporate
reorganization.
Net noninterest expense (defined as noninterest income minus noninterest
expense) as a percent of average earning assets was 2.98% in 1995 compared
to 2.95% in 1994 and 2.85% in 1993.
Income Taxes
The consolidated provision for federal and state income taxes was $3.9
million in 1995 compared to $3.4 million in 1994 and $3.3 million in 1993.
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 28.9% in 1995, 27.8 in 1994 and 27.5% in 1993.
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 23.0% in 1995, 25.1% in 1994 and 26.8% in
1993.
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 Consolidated Financial
Statements.
FINANCIAL CONDITION
Average assets increased $18.4 million, or 2.5%, from $745.3 million in
1994 to $763.7 million in 1995. Average earning assets increased to $681.2
million in 1995, a $14.3 million, or 2.1% increase over 1994. After
experiencing a reduction in loans in 1992, loan volume has improved.
Average loans have grown from $358.9 million in 1992 to $432.3 million in
1995, including growth of $25.4 million, or 6.3% during 1995. Growth in the
loan portfolio in 1995 was primarily funded through deposit growth of $10.1
million and a reduction in the Company's investment portfolio and federal
funds sold position of $7.8 million and $3.4 million, respectively.
Table 2 provides information on average balances while Table 4 highlights
the changing mix of the Company's earning assets over the last three years.
Loans
Local markets served by Group banks were generally improved during 1995.
Loan demand was fairly steady and slightly stronger during the second half.
Price and product competition strengthened during 1995 and there was
increasing demand for fixed rate financing. Real estate lending, an area
of primary focus, continued to improve. Other areas reflecting stronger
demand include home equity and indirect automobile lending. While the
markets were generally good, perhaps the most significant contributor to
loan growth was the Company's recent restructuring and an increased
emphasis on product marketing.
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 the
improvements noted in 1994 and 1995 will continue during 1996, 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)
1994 to Percentage Components
1995 of Total of Total Earning Assets
Change Change 1995 1994 1993
Loans:
Commercial, Financial
and Agricultural $ 4,266 29.9% 7.1% 6.6% 6.5%
Real Estate - Construction 4,986 35.0 3.7 3.1 3.2
Real Estate - Mortgage 3,100 21.7 37.7 38.0 35.5
Consumer 13,088 91.7 15.0 13.3 13.5
Total Loans 25,440 178.3 63.5 61.0 58.7
Securities:
Taxable (6,853) (48.0) 20.5 22.0 21.5
Tax-Exempt (910) (6.4) 10.4 10.8 10.0
Total Securities (7,763) (54.4) 30.9 32.8 31.5
Funds Sold (3,410) (23.9) 5.6 6.2 9.8
Total Earning Assets $14,267 100.0% 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. While there were no
Bankers' Acceptances or Term Federal Funds outstanding at December 31,
1995, they totaled $1.0 million at year-end 1994 and $6.5 million at year-
end 1993.
The Company's average loan-to-deposit ratio increased from 62.9% in 1994 to
65.8% in 1995 and reached a level of 66.0% in the fourth quarter. The
average loan-to-deposit ratio for 1993 was 60.6%.
Real estate construction and mortgage loans, combined, represented 64.8% of
total loans (net of unearned interest) in 1995 versus 66.6% in 1994. 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, 1995,
based upon maturities. Loans are arrayed as to those which mature 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 40.2% in 1994 to 30.2% in 1995.
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.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment of a
Loan, as amended, which prescribes how the allowance for loan losses
related to impaired loans should be determined. Certain loan categories
including residential, consumer and credit card loans are excluded from the
scope of this statement.
Impaired loans for Capital City Bank Group are primarily defined as all
nonaccruing loans for the categories which are included within the scope of
Statement No. 114. Adoption of Statement No. 114 had no significant impact
on the financial condition or results of operations of the Company. See
Note 5 in the Notes to Consolidated Financial Statements for further
information.
Table 5
LOANS BY CATEGORY
(Dollars in Thousands)
As of December 31,
1995 1994 1993 1992 1991
Commercial, Financial and
Agricultural $ 46,149 $ 39,288 $ 46,963 $ 57,188 $ 57,692
Real Estate - Construction 28,391 24,314 22,968 19,103 18,714
Real Estate - Mortgage 259,503 255,755 242,741 212,080 208,091
Consumer 113,736 106,656 93,895 89,848 89,529
Total Loans $447,779 $426,013 $406,567 $378,219 $374,026
Table 6
LOAN MATURITIES
(Dollars in Thousands)
Maturity Periods
Over One Over
One Year Through Five
Or Less Five Years Years
Total
Commercial, Financial and
Agricultural $ 33,632 $ 11,658 $ 859 $46,149
Real Estate 222,831 42,753 22,310 287,894
Consumer 32,509 80,878 349 113,736
Total $288,972 $135,289 $23,518 $447,779
Loans with Fixed Rates $ 88,899 $ 37,266 $ 8,915 $135,080
Loans with Floating or
Adjustable Rates 200,073 98,023 14,603 312,699
Total $288,972 $135,289 $23,518 $447,779
The allowance for loan losses at December 31, 1995 of $6.5 million compares
to $7.6 million at year-end 1994 and 1993. The allowance as a percent of
total loans declined from 1.79% in 1994 to 1.46% in 1995. The lower
percentage is attributable to a reduction in the Company's nonperforming
loans and continued low levels of net charge-offs. See the section entitled
"Risk Element Assets" for a further discussion.
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 the allowance, 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, 1995, 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 allocation of the
allowance is developed using management's best estimates based upon
available information such as regulatory examinations, internal loan
reviews and historical data and trends. The allocation by loan category
reflects a base level allocation derived primarily by analyzing the level
of problem loans, specific reserves and historical charge-off data.
Current and forecasted economic conditions, and other judgmental factors
which cannot be easily quantified (e.g. concentrations) are not presumed to
be included in the base level allocations, but instead are covered by the
unallocated portion of the reserve. The Company faces a geographic
concentration as well as a concentration in real estate lending. Both
risks are cyclical in nature and must be considered in establishing the
overall allowance for loan losses. Reserves in excess of the base level
reserves are maintained in order to properly reserve for the losses
inherent in the Company's portfolio due to these concentrations and
anticipated periods of economic difficulties.
Table 7
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(Dollars in Thousands)
For the Years Ended
December 31,
1995 1994 1993 1992 1991
Balance at Beginning of Year $7,551 $7,594 $7,585 $7,670 $7,526
Charge-Offs:
Commercial, Financial
and Agricultural 520 575 556 511 724
Real Estate-Construction - - - 33 -
Real Estate-Mortgage 139 315 81 460 175
Consumer 1,237 865 884 929 1,263
Total Charge-Offs 1,896 1,755 1,521 1,933 2,162
Recoveries:
Commercial, Financial
and Agricultural 157 104 198 231 177
Real Estate - Construction - - - -
Real Estate - Mortgage - 12 8 7 18
Consumer 369 350 364 394 294
Total Recoveries 526 466 570 632 489
Net Charge-Offs 1,370 1,289 951 1,301 1,673
Provision for Loan Losses 293 1,246 960 1,216 1,817
Balance at End of Year $6,474 $7,551 $7,594 $7,585 $7,670
Ratio of Net Charge-Offs During
Year to Average Loans Out-
standing, Net of Unearned Interest .32% .32% .25% .36% .45%
Allowance for Loan Losses as a
Percente of Loans, Net of Un-
earned Interest, at End of Year 1.46% 1.79% 1.90% 2.05% 2.10%
Allowance for Loan Losses as a
Multiple of Net Charge-Offs 4.73x 5.86x 7.99x 5.83x 4.58x
Risk Element Assets
Risk element assets consist of nonaccrual loans, renegotiated loans, other
real estate, loans past due 90 days or more, potential problem loans and
loan concentrations. Table 9 depicts certain categories of 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 nonperforming loans decreased $1.3 million, or 21.6%, from a
level of $6.0 million at December 31, 1994 to $4.7 million at December 31,
1995. During 1995, loans totaling approximately $2.4 million were placed
on nonaccrual, while loans totaling $3.7 million were removed from
nonaccruing status. Of the $2.4 million added, three credit relationships
comprised $1.1 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 $3.7 million removed from the
nonaccrual category, $2.3 million consists of principal reductions,
$647,000 consists of loans transferred to ORE and loans totaling $451,000
were charged off. The remaining decrease of $349,000 represents loans
which were either brought current and returned to an accrual status or
refinanced.
Table 8
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars in Thousands)
1995 1994 1993 1992 1991
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 $ 609 10.3% $ 442 9.3% $ 936 11.6% $1,416 15.1% $1,699 15.4%
Real Estate:
Construction 152 6.3% 187 5.7% 501 5.6% 647 5.0% 955 5.0%
Mortgage 2,484 58.0% 2,938 60.0% 2,459 59.7% 2,715 56.1% 2,148 55.7%
Consumer 1,044 25.4% 963 25.0% 420 23.1% 425 23.8% 741 23.9%
Not Allocated 2,185 - 3,021 - 3,278 - 2,382 - 2,127 -
Total $6,474 100.0% $7,551 100.0% $7,594 100.0% $7,585 100.0% $7,670 100.0%
Table 9
RISK ELEMENT ASSETS
(Dollars in Thousands)
As of December 31,
1995 1994 1993 1992 1991
Nonaccruing Loans $2,996 $4,278 $ 9,353 $ 6,987 $ 8,423
Restructured 1,686 1,694 65 169 176
Total Nonperforming Loans 4,682 5,972 9,418 7,156 8,599
Other Real Estate 1,001 1,581 3,466 4,416 4,385
Total Nonperforming Assets $5,683 $7,553 $12,884 $11,572 $12,984
Past Due 90 Days or More $ 273 $ 258 $ 104 $ 2,564 $ 622
Nonperforming Loans to Loans,
Net of Unearned Interest 1.05% 1.42% 2.36% 1.93% 2.36%
Nonperforming Assets to Loans,
Net of Unearned Interest,
Plus Other Real Estate 1.28% 1.79% 3.20% 3.09% 3.52%
Nonperforming Assets to Capital(1) 6.49% 9.45% 17.24% 16.36% 19.86%
Reserve to Nonperforming Loans 138.27% 126.44% 80.64% 105.99% 89.20%
(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 $285,000 higher for the year ended December 31,
1995.
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, 1995 was $35,000. Restructured
loans at December 31, 1995 consisted primarily of one large relationship
which was classified as restructured in accordance with Statement of
Financial Accounting Standards No. 15, prior to the adoption of Statement
No. 114 in January 1995. Loans restructured subsequent to January 1, 1995,
are deemed impaired, as that term is defined in Statement No. 114, and
will be accounted for accordingly.
Other real estate totaled $1.0 million at December 31, 1995, versus $1.6
million at December 31, 1994. 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 1995, the Company added
properties totaling $647,000 and liquidated, partially or completely,
properties totaling $1.2 million, resulting in a net reduction in other
real estate of $580,000. 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 totaled $1.3 million
at December 31, 1995.
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. Capital City Bank,
which operates predominately in a three county market area in North
Florida, comprised 83% 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, 1995, approximately 64% of the portfolio consisted of real
estate loans. Residential properties comprise approximately 55% 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, 1995, 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 decreased $7.8 million, or 3.6%,
during 1995. This followed an increase of $13.3 million, or 6.5%, in 1994.
As a percent of average earning assets, the investment portfolio
represented 30.9% in 1995, compared to 32.8% in 1994. In recent years,
other than 1995, the investment portfolio increased in size relative to
total earning assets as a result of the slowdown in loan production. In
1991, the comparable percentage was 21.9%. This recent trend reversed
itself somewhat in 1995, as the growth in loans exceeded the overall growth
in earning assets.
In 1995, average taxable investments decreased $6.9 million, or 4.7%, while
tax-exempt investments decreased $910,000, or 1.3%. 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 1993 and 1994,
the tax-exempt portfolio as a percent of average earning assets has
declined from 18.9% in 1986 to 10.4% in 1995. 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 recorded 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 in 1994, management classified approximately
30% of the total investment portfolio as Available-for-Sale. Following a
determination by the regulatory agencies during 1995 that the net
unrealized gain (loss) would be excluded from the computation of regulatory
capital, the Financial Accounting Standards Board offered companies a one-
time opportunity to transfer securities from held-to-maturity category to
the available-for-sale category without penalty. On December 27, 1995,
management transferred all securities classified as held-to-maturity to
available-for-sale. Securities transferred totaled $122.6 million with an
net unrealized gain after tax of $503,000. This transfer of securities
offers management full flexibility in managing its liquidity position and
interest rate sensitivity without adversely impacting its regulatory
capital levels. 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, 1995 shareholders' equity included a
net unrealized gain of $968,000. See the section entitled "Accounting
Pronouncements" and Note 1 in the Notes to Consolidated 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. This was true in 1995 as well. However, in 1994, in order to
invest in higher yielding securities, the Company sold approximately $7.0
million in securities, incurring a net pre-tax loss of $152,000. These
securities were sold from the available-for-sale portfolio and there were
no sales from the held-to-maturity portfolio in 1995 or 1994.
In 1995, proceeds from the sale of securities were nominal. However,
proceeds from "called" bonds and principal redemption of mortgage-backed
securities totaled $22.5 million and the related gains and losses totaled
$11,000 and $3,000, respectively.
The average maturity of the total portfolio at December 31, 1995 and 1994,
was 2.62 and 2.41 years, respectively. See Table 11 for a breakdown of
maturities by portfolio.
The weighted average taxable-equivalent yield of the investment portfolio
at December 31, 1995, was 6.20% versus 5.73% in 1994. The quality of the
municipal portfolio at such date is depicted in the chart below. There
were no investments in obligations, other than U.S. Governments, of any one
state, municipality, political subdivision or any other issuer that
exceeded 10% of the Company's shareholders' equity at December 31, 1995.
The net unrealized gain in the total portfolio at December 31, 1995, of
$1.5 million compares with a loss of $6.8 million at December 31, 1994.
See Note 3 in the Notes to Consolidated Financial Statements for a
breakdown of unrealized gains and losses. Tables 10 and 11 present a
detailed analysis of the Company's investment securities as to type,
maturity and yield.
MUNICIPAL PORTFOLIO QUALITY
(Dollars in Thousands)
Amortized Cost
Moody's Rating (000's) Percentage
AAA $46,684 61.4%
AA-1 1,810 2.4
AA 3,955 5.2
A-1 5,525 7.3
A 8,680 11.4
BAA 1,000 1.3
Not Rated(1) 8,332 11.0
Total $75,986 100.0%
(1) Of the securities not rated by Moody's,
$4.9 million are rated "A" or higher by S&P.
Table 10
DISTRIBUTION OF INVESTMENT SECURITIES
(Dollars in Thousands)
1995
Amortized Unrealized Unrealized Market
Available-For-Sale Cost Gains Losses Value
U.S. Treasury $ 72,289 $ 470 $ 54 $72,705
U.S. Government Agencies
and Corporations 70,883 264 96 71,051
States and Political
Subdivisions 75,986 1,037 143 76,880
Mortgage Backed Securities 5,965 47 26 5,986
Other Securities 4,107 19 1 4,125
Total Investment Securities $229,230 $1,837 $320 $230,747
Table 11
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
(Dollars in Thousands)
As of December 31, 1995
Weighted
Amortized Cost Market Value Average Yield(1)
U. S. GOVERNMENTS
Due in 1 year or less $ 64,543 $ 64,604 5.45%
Due over 1 year thru 5 years 78,629 79,152 5.76%
Due over 5 years thru 10 years - - -
Due over 10 years - - -
TOTAL 143,172 143,756 5.92%
STATE & POLITICAL SUBDIVISIONS
Due in 1 year or less 7,803 7,781 8.13%
Due over 1 year thru 5 years 47,146 47,796 6.65%
Due over 5 years thru 10 years 18,847 19,102 6.01%
Due over 10 years 2,190 2,201 7.53%
TOTAL 75,986 76,880 6.68%
MORTGAGE BACKED SECURITIES
Due in 1 year or less 444 451 6.98%
Due over 1 year thru 5 years 4,083 4,100 6.51%
Due over 5 years thru 10 years 582 594 7.68%
Due over 10 years 856 841 6.30%
TOTAL 5,965 5,986 6.62%
OTHER SECURITIES
Due in 1 Year or less 1,354 1,365 5.98%
Due over 1 year thru 5 years 149 179 5.59%
Due over 5 years thru 10 years 252 229 5.68%
Due over 10 years* 2,352 2,352 6.81%
TOTAL 4,107 4,125 6.40%
Total Investment Securities $229,230 $230,747 6.20%
*Federal Home Loan Bank Stock and Federal Reserve Bank Stock do not have a
stated maturities.
AVERAGE MATURITY (In Years) AS OF DECEMBER 31, 1995
Available For Sale
U. S. Governments 1.98
State and Political Subdivisions 3.81
Mortgaged Backed Securities 3.78
TOTAL 2.62
(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 $647.3 million in 1994 to $657.4
million in 1995, representing an increase of $10.1 million, or 1.6%. In
1994, deposits increased $16.9 million, or 2.7%. The Company experienced a
notable increase in competition for deposits during 1995, in terms of both
rate and product.
From 1991 to 1994, the Company experienced growth in noninterest bearing
deposits and a shift in funding sources from certificates of deposits to
other deposit categories. This pattern ran counter to the Company's
historical trends in which a majority of the growth was generated from
certificates of deposits. As rates rose during 1994 and early 1995,
however, depositors returned to more historical patterns shifting funds
from non-maturity deposits to certificates of deposit and investing new
funds in certificates. Average certificates of deposit increased $35.8
million, or 16.7%, over 1994. The growth in certificates of deposit was
partially offset by a reduction in money market accounts of $6.0 million,
or 7.9%, and savings of $22.3 million, or 20.7%. This shift in deposits
during 1995 put additional pressure on the Company's net interest margin.
Table 2 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 include federal funds purchased and
securities sold under agreements to repurchase, increased $1.0 million, or
5.6%.
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements
(Dollars in Thousands)
1995 1994 1993
Year End Balance $17,367 $13,964 $23,264
Rate at Year End 4.79% 5.38% 2.78%
Average Balance $19,308 $18,291 $17,765
Average Rate 5.45% 3.55% 3.08%
Maximum Outstanding
at Month-End $27,806 $35,516 $27,449
At December 31, 1995, the Company had $2.0 million in debt outstanding to
the Federal Home Loan Bank of Atlanta. The debt, which has a fixed rate of
interest of 6.04%, requires annual principal reductions of approximately
$110,000 with the remaining balance due at maturity in 2005. The debt was
used to match-fund selected lending activities and is secured by first
mortgage residential loans which are included in the Company's loan
portfolio. See Note 8 in the Notes to Consolidated Financial Statements.
Table 12
SOURCES OF DEPOSIT GROWTH
(Average Balances - Dollars in Thousands)
1994 to Percentage
1995 of Total Components of Total Deposits
Change Change 1995 1994 1993
Noninterest Bearing
Deposits $ 4,586 45.3% 24.4% 24.1% 23.7%
NOW Accounts (1,897) (18.7) 13.9 14.3 12.4
Money Market Accounts (5,985) (59.1) 10.7 11.8 12.7
Savings (22,333) (220.5) 13.0 16.7 18.1
Other Time 35,759 353.0 38.0 33.1 33.1
Total Deposits $10,130 100.0% 100.0% 100.0% 100.0%
Table 13
MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 OR OVER
(Dollars in Thousands)
December 31, 1995
Time Certificates of Deposit Percent
Three months or less $15,798 34.8%
Over three through six months 13,732 30.3
Over six through twelve months 6,496 14.3
Over twelve months 9,340 20.6
Total $45,366 100.0%
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.
As of December 31, 1995, the Company has available a $25.0 million credit
facility. The facility offers the Company an unsecured, revolving line of
credit for a period of three years which matures in November 1998. Upon
expiration of the revolving line of credit, the outstanding balance may be
converted to a term loan and repaid over a period of seven years. The term
loan is to be secured by stock of a subsidiary bank equal to at least 125%
of the principal balance of the term loan. 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. During
1995, the Company had no long-term debt outstanding under this credit
facility. The new facility was established to increase the Company's
borrowing capacity and to consolidate two existing credit facilities in the
amount of $6.0 million each. It is anticipated the Company may borrow up
to $20 million in connection with the proposed acquisition of First
Financial Bancorp, Inc., which is expected to close during the second half
of 1996. See Notes 2 and 8 in the Notes to Consolidated Financial
Statements.
The Company's new credit facility imposes 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 Consolidated Financial Statements for additional
information.
At December 31, 1995, the Company had $2.0 million in debt outstanding to
the Federal Home Loan Bank of Atlanta. The debt, which has a fixed rate of
interest of 6.04%, requires annual principal reductions of approximately
$110,000 with the remaining balance due at maturity in 2005. The debt was
used to match-fund selected lending activities and is secured by first
mortgage residential loans which are included in the Company's loan
portfolio. See Note 8 in the Notes to Financial Statements.
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, 1995, the Company had $111.2 million in
commitments to extend credit and $1.8 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, excluding the purchase of First
Financial Bancorp, Inc., will approximate $5.0 million to $7.0 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)
1995 1994 1993
Common Stock $ 31 $ 31 $ 31
Additional Paid in Capital 5,868 5,852 5,857
Retained Earnings 80,658 73,989 67,753
Subtotal 86,557 79,872 73,641
Treasury Stock (6,367) (6,588) (6,502)
Unrealized Gains (Losses) 968 (884) -
Total Shareholders'
Equity $81,158 $72,400 $67,139
The Company continues to maintain a strong capital position. The ratio of
shareholders' equity to total assets at year-end was 9.97%, 9.75%, and
8.81% in 1995, 1994, and 1993, 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, 1995 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 19.26% and a Tier 1 ratio of 18.02%. The proposed
acquisition of First Financial Bancorp, Inc., will be treated, when
consummated, as a purchase for accounting purposes and thus result in a
lower risk-based capital ratio. On a proforma basis as of December 31,
1995, the total risk-based capital ratio would have been 13.06% versus
19.26%.
In addition, a tangible leverage ratio is now being used in connection with
the risk-based capital standards and is defined as Tier 1 capital divided
by average assets. The minimum leverage ratio under this standard is 3%
for the highest-rated bank holding companies which are not undertaking
significant expansion programs. An additional 1% to 2% may be required for
other companies, depending upon their regulatory ratings and expansion
plans. On December 31, 1995, the Company had a leverage ratio of 9.84%,
which is in excess of regulatory requirements. On a proforma basis as of
December 31, 1995, the acquisition of First Financial Bancorp, Inc., would
have reduced this ratio to 6.73%.
In 1995, the Board of Directors declared dividends totaling $1.00 per
share, consisting of $.11 per share payable in July 1995 and $.89 per share
payable in January 1996. The Company declared dividends of $.91 per share
in 1994 and $.83 per share in 1993. The dividend payout ratio was 29.9%,
29.3%, and 29.4% for 1995, 1994, and 1993, respectively. Dividends declared
per share in 1995 represented a 9.9% increase over 1994.
At December 31, 1995, the Company's common stock had a book value of $28.44
per share compared to $25.44 in 1994 and $23.56 in 1993. In 1994 and 1995,
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, 1995, the net unrealized gain
was $968,000. At December 31, 1994, the Company had a net unrealized loss
of $884,000 and thus the net impact on equity for the year was $1.9
million, or $.65 per share. See Note 1 in the Notes to Consolidated
Financial Statements 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 $26.00 to $33.00 per share
for the two-year period ended December 31, 1995, with the most recent
trades at December 31, 1995, being at $33.00 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, 1995, the Company has repurchased 263,580 shares under the plan. No
shares were repurchased during 1995. On January 26, 1996, 1,692 shares
were issued to certain employees for achieving established performance
goals for the year ended December 31, 1995. The total value of the shares
issued was $56,000 based on a stock price of $33.00 per share.
Interest Rate Sensitivity
Table 14 presents the Company's consolidated interest rate sensitivity
position as of year-end 1995. 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
prepared on a consolidated basis and is assembled and presented in response
to regulatory reporting requirements.
The asset and liability values presented in Table 14 are as of December 31,
1995, which may not necessarily be indicative of the Company's interest
rate sensitivity over an extended period of time. The information, as
presented, incorporates certain assumptions which are set-forth in the
footnotes to the table.
The Company is currently liability sensitive which generally indicates that
in a period of rising interest rates the net interest margin will be
adversely impacted as the velocity and/or volume of liabilities being
repriced exceeds assets. However, as general interest rates rise or fall,
other factors such as current market conditions and competition may impact
how the Company responds to changing rates and thus impact the magnitude of
change in net interest income.
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".
Accounting Pronouncements
As discussed in Note 1 in the Notes to Consolidated 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 $230.7 million on December 31, 1995. As required
by the new accounting standard, the net unrealized gain or loss on
investment securities in the available-for-sale portfolio was recorded, net
of taxes, as a separate component of shareholders' equity. At December 31,
1995, the net unrealized gain totaled $968,000 versus a net unrealized loss
of $884,000 at December 31, 1994. As a result of a Financial Accounting
Standards Board (FASB) interpretation allowing a one-time transfer of
securities from the held-to-maturity category, investment securities with
an amortized cost of $122.6 million were transferred from held-to-maturity
to available-for-sale on December 27, 1995. At December 31, 1995, there
were no securities classified as held-to-maturity. See Note 3 in the Notes
to Consolidated Financial Statements for further information.
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 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 are 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. See Note 5 in the Notes to Financial
Statements for further information.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The
statement was adopted by the Company on January 1, 1996. The adoption of
this standard did not have a significant impact on the financial condition
or results of operations of the Company.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights". The statement requires that an enterprise recognize as
separate assets the rights to service mortgage loans for others, however
those servicing rights are acquired. Additionally, the enterprise must
periodically assess its capitalized mortgage servicing rights for
impairment based on the fair value of those rights. This statement was
adopted by the Company on January 1, 1996. The adoption of this statement
did not have a material impact on the financial condition or results of
operations of the Company.
Table 14
INTEREST RATE SENSITIVITY ANALYSIS
(Dollars in Thousands)
December 31, 1995
Non-Rate
0-90 Days 91-180 Days 181-365 Days Over One Year Sensitive Total
Loans, Net of Unearned Interest $136,677 $ 45,193 $ 92,598 $169,505 $ $443,973
Investment Securities (1) 45,193 31,338 54,435 100,081 231,047
Funds Sold 41,150 - - - 41,150
Total Earning Assets 223,020 76,531 147,033 269,586 716,170
Cash, Property and Other Assets - - - - 103,963 103,963
Less: Allowance for Loan Losses - - - - (6,474) (6,474)
Total Assets $223,020 $ 76,531 $147,033 $269,586 $ 97,489 $813,659
Demand Deposits $ - $ - $ - $ - $ 168,566 $168,566
NOW Accounts(2) 122,517 - - - 122,517
Money Market(2) 67,942 - - - 67,942
Savings(2) - - 78,522 - 78,522
Other Time 92,429 68,660 54,465 46,478 262,032
Total Deposits 282,888 68,660 132,987 46,478 $ 168,566 $699,579
Funds Purchased 17,367 - - - 17,367
Other Short-Term Borrowings 2,400 - - - 2,400
Long-Term Debt - - - 1,982 1,982
Other Liabilities - - - - 11,173 11,173
Shareholders' Equity - - -- - 81,158 81,158
Total Liabilities
& Shareholders' Equity $302,655 $ 68,660 $132,987 $ 48,460 $ 260,897 $813,659
Interest Rate Sensitivity Gap $(79,635) $ 7,871 $ 14,046 $221,126 $(163,408)
Cumulative Interest Rate
Sensitivity Gap $(79,635) $(71,764) $(57,718) $163,408 $ -
Cumulative Gap as a Percentage
of Earning Assets (11.12%) (10.02%) (8.06%) 22.82%
(1) Distribution reflects repricing opportunity as certain securities are listed
at their callable date rather than their maturity date.
(2) Nonmaturity deposits have been assigned to specified repricing categories
based upon expectations as to how these deposits reprice relative to changing
interest rates. Management believes the current presentation is based on
reasonable assumptions and may in fact overstate the Company's interest rate
sensitivity.
CONSOLIDATED FINANCIAL STATEMENTS
39
Report of Independent Certified Public Accountants
40
Consolidated Statements of Financial Condition
41
Consolidated Statements of Income
42
Consolidated Statements of Changes in Shareholders' Equity
43
Consolidated Statements of Cash Flows
44
Notes to Consolidated 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 statements of financial
condition of Capital City Bank Group, Inc. (a Florida Corporation) and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for
the years 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 audits. The consolidated financial
statements of Capital City Bank Group, Inc. and subsidiaries as of December
31, 1993, 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 consolidated
financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated 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, 1995 and 1994,
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 26, 1996
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands)
As of December 31,
1995 1994
ASSETS
Cash and Due From Banks (Note 7) $ 61,613 $63,327
Federal Funds Sold 41,150 25,740
Interest Bearing Deposits in Other Banks 300 -
Investment Securities Held-to-Maturity
(market value of $145,003 in 1994) (Note 3) - 150,441
Investment Securities Available-for-Sale (Note 3) 230,747 48,847
Loans (Notes 4 and 5) 447,779 426,013
Unearned Interest (3,806) (5,209)
Allowance for Loan Losses (6,474) (7,551)
Loans, Net 437,499 413,253
Premises and Equipment (Note 6) 26,240 24,292
Accrued Interest Receivable 7,339 5,546
Intangibles (Note 1) 1,129 1,379
Other Assets 7,642 9,805
Total Assets $813,659 $742,630
LIABILITIES
Deposits:
Noninterest Bearing Deposits $168,566 $167,711
Interest Bearing Deposits (Note 7) 531,013 480,463
Total Deposits 699,579 648,174
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements 17,367 13,964
Other Short-Term Borrowings (Note 8) 2,400 999
Long-Term Debt (Note 8) 1,982 -
Other Liabilities 11,173 7,093
Total Liabilities 732,501 670,230
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value; 4,000,000 shares
authorized; 3,105,243 issued 31 31
Additional Paid In Capital 5,868 5,852
Retained Earnings 80,658 73,989
Treasury Stock: 251,527 shares in 1995
and 259,428 shares in 1994, at cost (6,367) (6,588)
Net Unrealized Gain (Loss) on Available-
for-Sale Securities 968 (884)
Total Shareholders' Equity 81,158 72,400
Total Liabilities and
Shareholders' Equity $813,659 $742,630
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except Per Share Data)
For the Years Ended
December 31,
1995 1994 1993
INTEREST INCOME
Interest and Fees on Loans $40,826 $35,490 $33,554
Investment Securities:
U.S. Treasury 4,205 4,967 5,564
U.S. Government Agencies and Corporations 3,500 1,991 1,621
States and Political Subdivisions 3,444 3,461 3,492
Other Securities 261 313 210
Deposits in Other Banks 2 17 119
Federal Funds Sold 2,239 1,652 1,835
Total Interest Income 54,477 47,891 46,395
INTEREST EXPENSE
Deposits (Note 7) 19,382 13,990 14,213
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 1,053 650 548
Other Short-Term Borrowings (Note 8) 49 31 23
Long-Term Debt (Note 8) 4 54 56
Total Interest Expense 20,488 14,725 14,840
Net Interest Income 33,989 33,166 31,555
Provision for Loan Losses (Note 5) 293 1,246 960
Net Interest Income After Provision for
Loan Losses 33,696 31,920 30,595
NONINTEREST INCOME
Service Charges on Deposit Accounts 5,649 5,408 5,601
Data Processing 2,608 2,434 2,380
Income from Fiduciary Activities 942 680 643
Securities Transactions (Note 3) 8 (147) 28
Other (Note 13) 3,963 4,634 3,826
Total Noninterest Income 13,170 13,009 12,478
NONINTEREST EXPENSE
Salaries and Employee Benefits (Note 10) 17,959 17,087 16,183
Occupancy, Net 2,538 2,343 2,183
Furniture and Equipment 3,346 2,910 2,909
Other (Note 13) 9,623 10,371 9,761
Total Noninterest Expense 33,466 32,711 31,036
Income Before Income Taxes and
Accounting Change 13,400 12,218 12,037
Income Taxes (Note 9) 3,878 3,393 3,309
Income Before Accounting Change 9,522 8,825 8,728
Cumulative Effect of a Change in
Accounting Method (Note 1) - - (484)
NET INCOME $ 9,522 $ 8,825 $ 8,244
Net Income Per Share Before Accounting Change $ 3.34 $ 3.10 $ 2.99
Net Income Per Share $ 3.34 $ 3.10 $ 2.82
Average Common Shares Outstanding 2,853 2,847 2,924
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Thousands, Except per Share Data)
Unrealized
Additional Gains (Losses)
Common Paid In Retained Treasury On Securities,
Stock Capital Earnings Stock Net of Taxes Total
Balance, December 31, 1992 $31 $5,857 $61,936 $(4,656) $ - $63,168
Net Income 8,244 8,244
Cash Dividends
($.83 per share) (2,427) (2,427)
Sale of Treasury Stock 3 3
Purchase of Treasury Stock (1,849) (1,849)
Balance, December 31, 1993 $31 $5,857 $67,753 $(6,502) $ - $67,139
Cumulative Adjustment Due to
Change In Accounting (Note 1) 848 848
Net Income 8,825 8,825
Cash Dividends
($.91 per share) (2,589) (2,589)
Sale of Treasury Stock (5) 65 60
Purchase of Treasury Stock (151) (151)
Net Change In Unrealized
Gains/(Losses) (1,732) (1,732)
Balance, December 31, 1994 $31 $5,852 $73,989 $(6,588) $ (884) $72,400
Net Income 9,522 9,522
Cash Dividends (2,853) (2,853)
($1.00 per share)
Sale of Treasury Stock 16 221 237
Transfer of Held-to-Maturity
Securities to Available-for-Sale
(Note 3) 503 503
Net Change In Unrealized
Gains (Losses) 1,349 1,349
Balance, December 31, 1995 $31 $5,868 $80,658 $(6,367) $ 968 $81,158
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the Years Ended December 31,
1995 1994 1993
Net Income $ 9,522 $ 8,825 $ 8,244
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses 293 1,246 960
Depreciation 2,363 1,916 1,881
Net Loss on Sale of Properties 83 812 144
Amortization of Intangible Assets 250 341 338
Non-Cash Compensation 206 70 -
Deferred Income Taxes 893 101 74
Cumulative Effect of Accounting Change - - 484
Net (Increase) Decrease in
Interest Receivable (1,793) (79) (339)
Net (Increase) Decrease in
Other Assets 1,284 (79) (1,537)
Net Increase (Decrease) in
Other Liabilities 3,817 604 319
Net Cash Provided by Operating Activities 16,918 13,757 10,568
Cash Flows Used in Investing Activities:
Proceeds from Payments/Maturities of
Investment Securities Held-To-Maturity 48,529 77,324 82,541
Proceeds from Payments/Maturities of
Investment Securities Available-for-Sale 32,486 17,389 -
Purchase of Investment Securities
Held to Maturity (27,000) (64,865) (114,726)
Purchase of Investment Securities
Available for Sale (83,621) (11,398) -
Net Increase in Loans (24,539) (22,669) (17,235)
Purchase of Premises & Equipment (4,482) (6,065) (6,952)
Sales of Premises & Equipment 89 279 1,008
Cash Acquired in Bank Acquisitions - - 28,811
Net Cash Used in Investing Activities (58,538) (10,005) (26,553)
Cash Flows Provided by (Used in) Financing Activities:
Net Increase (Decrease) in Deposits 51,405 (14,571) 21,150
Net Increase (Decrease) in Federal
Funds Purchased 3,403 (9,300) 5,703
Net Increase (Decrease) in Other
Short-Term Borrowings 1,401 (202) (20)
Addition to Long-Term Debt 1,982 - 1,400
Repayment of Long-Term Debt - (1,900) (1,500)
Dividends Paid (2,590) (2,447) (2,282)
Sale (Purchase) of Treasury Stock 15 (156) (1,846)
Net Cash Provided by (Used in) Financing
Activities 55,616 (28,576) 22,605
Net Increase (Decrease) in Cash
and Cash Equivalents 13,996 (24,824) 6,620
Cash and Cash Equivalents at Beginning
of Year 89,067 113,891 107,271
Cash and Cash Equivalents at End
of Year $103,063 $ 89,067 $113,891
Supplemental Disclosures:
Interest on Deposits $ 18,441 $14,381 $14,944
Interest on Debt 1,106 $ 735 $ 627
Taxes Paid $ 2,868 $ 3,614 $ 3,013
Securities Transferred from Held-To-Maturity
To Available-for-Sale $122,630 $ - $ -
Loans Transferred To Other Real Estate $ 647 $ 453 $ 910
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Notes to Consolidated 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.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from these estimates; however,
in the opinion of management, such variances would not be material.
Cash and Cash Equivalents
Cash and cash equivalents include 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, investment 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 Consolidated
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 a 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
nonaccrual 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 the allowance, 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 a 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 is in doubt.
Statement of Financial Accounting Standards No. 114 -- "Accounting by
Creditors for Impairment of a Loan", as amended, requires impaired
loans to 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. This accounting pronouncement, which was
adopted on a prospective basis on January 1, 1995, did not have a
material impact on the Company's financial condition, results of operations,
or allowance for loan loss.
Long-Lived Assets
Premises and equipment are stated at cost less accumulated depreciation,
computed on the straight-line method over the estimated useful lives for
each type of asset. Additions and major facilities are capitalized and
depreciated in the same manner. Repairs and maintenance are charged to
operating expense as incurred.
Intangible assets consist primarily of core deposit assets which were
recognized in connection with prior acquisitions. Core deposit is separate
and distinct from goodwill and is an intangible asset which represents the
present value of the future stream of income to be derived from investing
the core deposits of the acquired bank. All intangible assets are being
amortized on the straight-line method over various periods ranging from one
to twenty five years with the majority being written off over an average
life of approximately ten years.
The pretax amortization of all intangible assets was approximately $250,000
in 1995, $341,000 in 1994 and $338,000 in 1993. The Company adopted, SFAS
No. 122, accounting for Mortgage Servicing Rights on January 1, 1996.
The adoption of SFAS No 122 did not have a significant impact on the
financial condition or results of operations of the Company.
Long-lived assets are evaluated regularly for other than temporary
impairment. If circumstances suggest that their value may be impaired and
the write down would be material, as assessment of recoverability is
performed prior to any write down of the asset. SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of must be adopted on or before January 1, 1996. The Company
adopted the standard on January 1, 1996, and the adoption did not have a
significant impact on the financial condition or results of operations of
the Company.
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 totaled $1.0 million and $1.6 million at December
31, 1995 and 1994, 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 $484,000, which was recognized in the first
quarter of 1993. See Note 9 for further discussion.
Note 2
ACQUISITIONS
During 1993, the Company consummated the purchase and assumption of four
branch offices. Assets and liabilities acquired through acquisition, on a
combined basis, are as follows:
(Dollars in Thousands)
Loans $(13,229)
Premises & Equipment (855)
Intangible Assets (1,236)
Other Assets (70)
Total Assets $(15,390)
Deposits 44,097
Other Liabilities 104
Cash Acquired in
Acquisitions $ 28,811
On December 10, 1995, the Company executed an Agreement and Plan of Merger
to acquire First Financial Bancorp, Inc., ("FFB") for $22.00 per share in
cash, or a total purchase price of approximately $20.3 million. First
Financial is a $230 million federal savings bank headquartered in
Tallahassee, Florida, with six offices located in five Florida counties.
It is anticipated the transaction will close during the second half of
1996, expanding the number of counties served by the Company from seven to
eleven and increasing the number of offices to thirty five.
Note 3
INVESTMENT SECURITIES
As a result of a Financial Accounting Standards Board (FASB) interpretation
allowing a one-time transfer of securities from the held-to-maturity
category, investment securities with an amortized cost of $122,630,000 and
net unrealized appreciation of $503,000 were transferred from held-to-
maturity to available-for-sale on December 27, 1995.
The amortized cost and related market value of investment securities at
December 31, were as follows:
(Dollars in Thousands)
1995
Amortized Unrealized Unrealized Market
Available-for-Sale Cost Gains Losses Value
U.S. Treasury $ 72,289 $ 470 $ 54 $72,705
U.S. Government Agencies
and Corporations 70,883 264 96 71,051
States and Political
Subdivisions 75,986 1,037 143 76,880
Mortgaged Backed Securities 5,965 47 26 5,986
Other Securities 4,107 19 1 4,125
Total Investment Securities $229,230 $1,837 $320 $230,747
1994
Amortized Unrealized Unrealized Market
Held-To-Maturity Cost Gains Losses Value
U.S. Treasury $ 72,979 $ 1 $1,681 $ 71,299
U.S. Government Agencies
and Corporations 23,018 2 1,415 21,605
States and Political
Subdivisions 49,125 134 2,026 47,233
Mortgage Backed Securities 3,005 2 183 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 3 443 6,601
States and Political
Subdivisions 19,641 77 805 18,913
Mortgage Backed Securities 2,932 - 32 2,900
Other Securities 1,981 - 2 1,979
Total Investment Securities $ 50,229 $80 $1,462 $ 48,847
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:
(Dollars in Thousands)
Total Gross Gross
Year Proceeds Realized Gains Realized Losses
1995 $25,296 $11 $ 3
1994 $11,476 $13 $160
1993 $31,681 $70 $ 42
Total proceeds include principal reductions in mortgage backed securities
and proceeds from securities which were called of $22,546,000, $4,033,000, and
$31,581,000, in 1995, 1994, and 1993, respectively.
As of December 31, 1995, the Company's investment securities had the
following maturity distribution:
(Dollars in Thousands)
Amortized Cost Market Value
Due in one year or less $ 74,144 $ 74,201
Due after one through five years 130,007 131,227
Due after five through ten years 19,681 19,925
Over ten years 5,398 5,394
Total Investment Securities $229,230 $230,747
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Securities with an amortized cost of $60,289,000 at December 31, 1995, were
pledged to secure public deposits and for other purposes.
Note 4
LOANS
At December 31, the composition of the Company's loan portfolio was as
follows:
(Dollars in Thousands)
1995 1994
Commercial, Financial and
Agricultural $ 46,149 $ 39,288
Real Estate - Construction 28,391 24,314
Real Estate - Mortgage 259,503 255,755
Consumer 113,736 106,656
Total Gross Loans $447,779 $426,013
Nonaccruing loans amounted to $2,996,000 and $4,278,000 at December 31,
1995 and 1994, respectively. Restructured loans amounted to $1,686,000 and
$1,694,000 at December 31, 1995 and 1994, respectively. If such nonaccruing
and restructured loans had been on a fully accruing basis, interest income
would have been $320,000 higher in 1995 and $529,000 higher in 1994.
Note 5
ALLOWANCE FOR LOAN LOSSES
An analysis of the changes in the allowance for loan losses for the years
ended
December 31, is as follows:
(Dollars in Thousands)
1995 1994 1993
Balance, Beginning of Year $7,551 $7,594 $7,585
Provision for Loan Losses 293 1,246 960
Recoveries on Loans
Previously Charged-Off 526 466 570
Loans Charged-Off (1,896) (1,755) (1,521)
Balance, End of Year $6,474 $7,551 $7,594
The value of a loan which is deemed "impaired" is measured based on the
present value of expected future cash flows discounted at the loan's
initial effective interest rate or the fair value of the collateral, if the
loan is collateral dependent. If the value of a loan is less than its
recorded investment, a valuation allowance is established. This valuation
allowance is included in the total allowance for loan losses, which is
established to cover losses inherent in the portfolio as a whole. Certain
loan categories including residential, consumer and credit card loans are
excluded from the scope of this statement. Adoption of SFAS No. 114 did
not have a material impact on the level of the allowance for loan losses.
As of January 1, 1995, loans which were previously deemed insubstance
foreclosures and classified as other real estate have been reclassified as
loans. Insubstance foreclosures are not material and have not been
reclassified for prior periods.
Impaired loans are primarily defined as all nonaccruing loans. Selected
information pertaining to impaired loans at December 31, 1995 is depicted
in the table below.
(Dollars in Thousands)
Valuation
Balance Allowance
Impaired Loans:
With Related Credit Allowance $ 946 $ 334
Without Related Credit Allowance $ 1,962 $ -
Average Recorded Investment for the Period $ 3,282 $ *
* Not Applicable
The Company recognizes income on impaired loans primarily on the cash
basis. Any change in the present value of expected cash flows is
recognized through the allowance for loan losses. For the period ended
December 31, 1995, the Company recognized $93,000 in interest income on
impaired loans, of which $75,000 was collected in cash.
Note 6
PREMISES AND EQUIPMENT
The composition of the Company's premises and equipment at December 31, was
as
follows:
(Dollars in Thousands)
1995 1994
Land $ 5,705 $ 5,286
Buildings 21,120 20,001
Fixtures and Equipment 18,409 16,656
Total 45,234 41,943
Accumulated Depreciation (18,994) (17,651)
Premises and Equipment, Net $ 26,240 $ 24,292
Note 7
DEPOSITS
Interest bearing deposits, by category, as of December 31, are as follows:
(Dollars in Thousands)
1995 1994
NOW Accounts $122,517 $ 95,540
Money Market Accounts 67,942 71,763
Savings Accounts 78,522 101,009
Other Time Deposits 262,032 212,151
Total $531,013 $480,463
Time deposits in denominations of $100,000 or more totaled $45,366,000 and
$40,774,000, at December 31, 1995 and 1994, respectively.
The average balances maintained on deposit with the Federal Reserve Bank
for the
years ended December 31, 1995 and 1994, were $29,811,000 and $27,600,000,
respectively.
Interest expense on deposits for the three years ended December 31, is as
follows:
(Dollars in Thousands)
1995 1994 1993
NOW Accounts $ 1,806 $ 1,809 $ 1,617
Money Market Accounts 2,108 1,731 1,779
Savings Accounts 1,942 2,597 2,953
Other Time Deposits 13,526 7,853 7,864
Total $19,382 $13,990 $14,213
Note 8
DEBT
As of December 31, 1995, the Company has available a $25.0 million credit
facility. The facility offers the Company an unsecured, revolving line of
credit for a period of three years which matures in November 1998. Upon
expiration of the revolving line of credit, the outstanding balance may be
converted to a term loan and repaid over a period of seven years. The term
loan is to be secured by stock of a subsidiary bank equal to at least 125%
of the principal balance of the term loan. 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. During
1995, the Company had no long-term debt outstanding under this credit
facility. The existing loan agreement places certain restrictions on the
amount of capital which must be maintained by the Company. On December 31,
1995, the Company's capital exceeded the most restrictive covenants of the
agreement.
At December 31, 1995, the Company had $2.0 million in debt outstanding to
the Federal Home Loan Bank of Atlanta. The debt, which has a fixed rate of
interest of 6.04%, requires annual principal reductions of approximately
$110,000 with the remaining balance due at maturity in 2005. The debt was
used to match-fund selected lending activities and is secured by first
mortgage residential loans which are included in the Company's loan
portfolio.
As of December 31, 1995 and 1994, the Company had other short-term
borrowings totaling $2.4 million and $1.0 million, respectively. These
notes are secured by investment securities and the average interest rates
were 4.23% and 3.67% for the years ended 1995 and 1994, respectively.
Note 9
INCOME TAXES
The provision for income taxes reflected in the statement of income was
comprised of the following components:
(Dollars in Thousands)
1995 1994 1993
Currently Payable:
Federal $2,646 $2,894 $2,848
State 339 398 387
Deferred:
Federal 762 87 59
State 131 14 15
Total $3,878 $3,393 $3,309
The net deferred tax asset and liability and the temporary differences
comprising those balances at December 31, 1995 and 1994, are as follows:
(Dollars in Thousands)
1995 1994
Deferred Tax Asset:
Allowance for Loan Losses $2,438 $2,842
Deferred Loan Fees - 338
Unrealized Losses on Investment Securities - 497
Stock Incentive Plan 261 206
Writedown of Real Estate Held for Sale 25 38
Other 81 140
Total Deferred Tax Asset $2,805 $4,061
Deferred Tax Liability:
Premises and Equipment $ 851 $ 845
Employee Benefits 593 374
Unrealized Gains on Investment Securities 549 -
FDIC Premiums - 254
Deferred Loan Fees 109 -
Other 84 30
Total Deferred Tax Liability 2,186 1,503
Net Deferred Tax Asset $ 619 $2,558
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:
(Dollars in Thousands)
1995 1994 1993
Computed Tax Expense $4,556 $4,154 $4,093
Increases (Decreases)
Resulting From:
Tax-Exempt Interest Income (1,046) (1,079) (1,087)
State Income Taxes,
Net of Federal Income
Tax Benefit 310 272 265
Other 58 46 38
Actual Tax Expense $3,878 $3,393 $3,309
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 financial condition, and major assumptions used to determine
these amounts.
(Dollars in Thousands)
1995 1994 1993
Components of Pension
Expense:
Service Cost $ 774 $ 764 $ 685
Interest Cost 983 848 845
Actual Return on Plan Assets (3,029) (318) (525)
Net Amortization and Deferral 2,173 (406) (331)
Total $ 901 $ 888 $ 674
Actuarial Present Value of
Projected Benefit Obligations:
Accumulated Benefit Obligations:
Vested $ 8,353 $6,861 $6,896
Nonvested 1,695 1,097 1,067
$10,048 $7,958 $7,963
Plan Assets at Fair Value
(primarily listed stocks and
bonds, U.S. Government Secur-
ities and interest bearing
deposits) $ 15,946 $ 12,156 $ 10,898
Projected Benefit Obligation (14,565) (11,672) (11,825)
Plan Assets in Excess of
Projected Benefit Obligation 1,381 484 (927)
Unrecognized Net Loss 1,636 2,187 3,466
Unrecognized Net Asset (1,412) (1,648) (1,884)
Prepaid Pension Cost $ 1,605 $ 1,023 $ 655
Major Assumptions:
Discount Rate 7.50% 8.25% 7.50%
Rate of Increase in
Compensation Levels 5.50% 5.50% 5.50%
Expected Long-Term Rate
of Return on Plan Assets 7.50% 7.50% 7.50%
The Company has a stock incentive plan under which shares of the Company's
stock are issued as incentive awards to selected participants. The expense
recorded related to this plan was approximately $424,000, $258,000 and
$354,000 in 1995, 1994 and 1993, respectively.
The Company has an Employee Stock Purchase Plan under which employees may
elect to make a monthly contribution towards the purchase of company stock
on a semiannual basis. One hundred fifty thousand (150,000) shares of
common stock are reserved for issuance under the Stock Purchase Plan. The
Company will issue 6,660 shares under the plan in 1996, for the period
ended December 31, 1995.
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 $225,000, $242,000, and $266,000 during 1995, 1994,
and 1993, 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, 1995 and 1994, certain officers and directors were indebted
to the Company's bank subsidiaries in the aggregate amount of $11,669,000 and
$11,514,000, respectively. During 1995, $12,298,000 in new loans were made
and repayments totaled $12,143,000. These loans were made on similar 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 1996, the bank
subsidiaries may declare dividends without regulatory approval of $9.8 million
plus an additional amount equal to the net profits of the Company's subsidiary
banks for 1996 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.
(Dollars in Thousands)
1995 1994 1993
Noninterest Income:
Merchant Fee Income $1,227 $ 932 $ 642
Noninterest Expense:
Employee Insurance 1,068 932 954
Payroll Taxes 963 927 879
Maintenance and Repairs 1,955 1,760 1,689
Professional Fees 565* 667 659
Advertising 494* 706 659
Printing & Supplies 1,634 1,129 1,065
Telephone 662* 700 561*
Insurance (including FDIC Premium) 1,042 1,285 1,209
Commission/Service Fees 878 890* 695*
*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, 1995, the amounts associated with
the Company's off-balance-sheet obligations were as follows:
Amount
Commitments to Extend Credit(1) $111,248
Standby Letters of Credit $ 1,812
(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
Company's subsidiary banks, the Company has both a geographic concentration
as well as a concentration in the types of loans funded. Capital City Bank,
which is headquartered in North Florida, accounts for approximately 82% of
the Companys total loan volume. At December 31, 1995 approximately 64% 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 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 - The carrying value of the Company's long-term debt approximates
fair value.
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:
(Dollars in Thousands) At December 31,
1995 1994
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
Investment Securities (1) $230,747 $230,747 $199,288 $193,850
Loans, Net of Allowance
for Loan Losses 437,499 441,446 413,253 405,899
Financial Liabilities:
Deposits 699,579 700,868 648,174 646,354
(1) At December 31, 1995 all investment securities were carried at fair
value. See Note 3 for further information.
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 are condensed statements of financial condition of the parent
company at December 31:
Parent Company Statements of Financial Condition
(Dollars in Thousands)
1995 1994
ASSETS
Cash and Due from Group Banks $ 4,378 $ 2,820
Investment in Group Banks 80,143 72,442
Other Assets 227 351
Total Assets $84,748 $75,613
LIABILITIES
Dividends Payable $ 2,539 $ 2,277
Long-Term Debt (Note 8) - -
Other Liabilities 1,051 936
Total Liabilities 3,590 3,213
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value; 4,000,000
shares authorized; 3,105,243 issued 31 31
Additional Paid in Capital 5,868 5,852
Retained Earnings 80,658 73,989
Treasury Stock: 251,527 shares in 1995
and 259,428 shares in 1994, at cost (6,367) (6,588)
Net Unrealized Gain (Loss) on Available-for-
Sale Securities 968 (884)
Total Shareholders' Equity 81,158 72,400
Total Liabilities and Shareholders' Equity $84,748 $75,613
The operating results of the parent company for the three years ended
December 31, are shown below:
Parent Company Statements of Income
(Dollars in Thousands)
1995 1994 1993
OPERATING INCOME
Income Received from Group Banks:
Dividends (Note 12) $3,884 $4,615 $4,675
Group Overhead Fees 2,702 2,311 1,986
Total Operating Income 6,586 6,926 6,661
OPERATING EXPENSE
Salaries and Employee Benefits 2,064 1,565 1,617
Legal Fees 48 74 63
Professional Fees 243 157 171
Advertising 391 594 433
Travel and Entertainment 52 72 63
Amortization of Excess of Purchase Price
Over Book Value of Net Assets Acquired 52 52 52
Interest on Debt - 54 56
Dues and Memberships 46 49 42
Other 204 361 180
Total Operating Expense 3,100 2,978 2,677
Income Before Income Taxes and Equity
in Undistributed Earnings of Group Banks 3,486 3,948 3,984
Income Tax Benefit (135) (233) (230)
Income Before Equity in Undistributed
Earnings of Group Banks 3,621 4,181 4,214
Equity in Undistributed Earnings
of Group Banks 5,901 4,644 4,030
Net Income $9,522 $8,825 $8,244
The cash flows for the parent company for the three years ended December
31, were as follows:
Parent Company Statements of Cash Flows
1995 1994 1993
Net Income $9,522 $8,825 $8,244
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Equity in undistributed
Earnings of Group Banks (5,901) (4,644) (4,030)
Non-Cash Compensation 206 70 -
Amortization of Excess of Purchase
Price Over Book Value of Net
Assets Acquired 52 52 51
(Increase) Decrease in Other Assets 140 3 (189)
Net Increase in
Other Liabilities 114 228 333
Net Cash Provided by Operating Activities 4,133 4,534 4,409
Cash Flows Used in Financing Activities:
Addition to Long-Term Debt - - 1,400
Repayment of Long-Term Debt - (1,900) (1,500)
Payment of Dividends (2,590) (2,447) (2,282)
Sale (Purchase) of Treasury Stock, Net 15 (156) (1,846)
Net Cash Used in Financing Activities (2,575) (4,503) (4,228)
Net Increase in Cash 1,558 31 181
Cash at Beginning of Period 2,820 2,789 2,608
Cash at End of Period $4,378 $2,820 $ 2,789
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 its deposits are insured by the Federal
Deposit Insurance Corporation. At the time of merger, Capital City Bank
had 20 banking locations and represented approximately 82% of the Company's
total assets. The Company's operating results for 1994 included pre-tax
charges of $731,000 which were attributable to corporate reorganization.
Net Income and Balance Sheet Information By Bank (Unaudited)
Capital Levy Farmers & Branford
City County Merchants State
Bank* State Bank Bank of Trenton Bank
(Dollars In Thousands)
For the Year: 1995 $ 7,743 $ 909 $ 576 $ 557
Net Income 1994 7,337 1,000 503 419
1993 7,088 777 477 364
At December 31:
Loans,
Net of
Unearned 1995 $362,462 $42,313 $21,384 $17,714
Interest 1994 342,606 42,343 20,021 15,834
1993 323,272 43,366 19,498 13,288
Assets 1995 $699,697 $78,020 $36,898 $32,247
1994 611,923 71,004 33,457 28,953
1993 623,972 75,583 32,950 30,181
Noninterest
Bearing
Deposits 1995 $154,241 $12,321 $ 5,163 $5,362
1994 152,450 11,104 5,903 4,897
1993 156,634 9,782 5,049 4,407
Interest
Bearing 1995 $424,228 $56,636 $27,176 $22,974
Deposits 1994 383,991 51,983 23,749 20,740
1993 386,229 57,835 24,553 22,143
Shareholders'
Equity 1995 $ 63,756 $ 8,156 $ 3,971 $ 3,547
1994 57,607 7,497 3,537 3,036
1993 54,766 7,060 3,317 2,774
*Information for Capital City Bank is presented on a proforma basis for
years prior to 1995.
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, 1996, subject to ratification by the shareholders. Fiscal 1996
will be the third 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 10, 1996 to be filed on or
before April 10, 1996.
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 10, 1996, to be filed on or before April 10, 1996.
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
10, 1996, to be filed on or before April 10, 1996.
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 10, 1996 to be filed on or before
April 10, 1996.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
EXHIBITS
2(a) Agreement and Plan of Merger, dated as of December 10, 1995, by and
among Capital City Bank Group, Inc.; a Florida corporation to be formed as
a direct wholly-owned subsidiary of the Company; and First Financial
Bancorp, Inc.*
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) By-Laws, as amended, of Capital City Bank Group, Inc. are incorporated
herein by reference to Exhibit 3(b) of the Company's 1983 Form 10-K (File
No. 2-86158).
10(a) Merger Agreement and Plan of Merger, dated July 25, 1994, 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, is incorporated herein by
reference to Exhibit A in Registrant's Form 10K-A, dated April 5, 1995.
10(b) Promissory Note and Pledge and Security Agreement evidencing a line
of credit by and between Registrant and SunTrust, dated November 18, 1995.
10(c) Capital City Bank Group, Inc. 1992 Stock Incentive Plan is
incorporated herein by reference to Exhibit A of the Registrant's 1992
Proxy Statement, dated Aril 8, 1992.
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.
10(e) Capital City Bank Group, Inc. 1996 Associate Incentive Plan is
incorporated herein by reference to Exhibit A of the Registrant's 1996
Proxy, dated onor about April 10, 1996.
21 For a listing of Capital City Bank Group's subsidiaries See Item I.
22 (a) Report of Independent Accountants
27 Financial Data Schedule
*To be filed as an amendment to this Form 10K
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 1995.
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 22, 1996, 1996 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 22, 1996 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.