CAPITAL CITY BANK GROUP INC - 10-K Annual Report

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1996 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, 1996

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

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.

As of March 3, 1997, there were issued and outstanding 2,897,953
shares of the registrant's common stock. The registrant's voting
stock is listed on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market under the symbol
"CCBG." The aggregate market value of the voting stock held by
nonaffiliates of the registrant, based on the average of the bid and
asked prices of the registrant's common stock as quoted on NASDAQ on
March 3, 1997, was $68,274,608.

DOCUMENTS INCORPORATED BY REFERENCE

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 1996 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 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8. Financial Statements and Supplementary Data 38
Item 9. Changes in and Disagreement with Accountants on Accounting
and Financial Disclosure 59

PART III

Item 10. Directors and Executive Officers of the Registrant 59
Item 11. Executive Compensation 59
Item 12. Security Ownership of Certain Beneficial Owners and
Management 59
Item 13. Certain Relationships and Related Transactions 59

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 59

PART I

Item I. Business

General

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. 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
has allowed 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. In addition to its four
bank subsidiaries, the Company has four other indirect subsidiaries,
Capital City Trust Company, Capital City Securities, Inc., Capital
City Mortgage Company and Capital City Services Company, which are
wholly-owned subsidiaries of Capital City Bank.

On July 1, 1996, the Company completed its acquisition of First
Financial Bancorp, Inc. ("First Financial"), parent company of First
Federal Bank, a federal savings bank headquartered in Tallahassee,
Florida. First Financial was acquired for $20 million in cash. The
Company borrowed $15 million to fund the acquisition. Subsequent to
the acquisition of First Financial, First Federal Bank was merged into
Capital City Bank on December 6, 1996. As of June 30, 1996, First
Financial had approximately $244 million in assets, $192 million in
loans, $205 million in deposits, $15 million in equity and operated
five branch locations in North Florida.

As of December 31, 1996, Capital City Bank had assets totaling $865.2
million, which constituted approximately 85% of the Company's total
consolidated assets. Capital City Bank earned $9.7 million for the
year ended December 31, 1996 which represented approximately 85% of
the Company's consolidated earnings. See page 58 for net income and
balance sheet information on CCBG's subsidiaries.

The Company and Capital City Bank are located in Tallahassee, Florida,
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 CCBG serve the North Florida and South Georgia markets
and, collectively, are referred to herein as the "Group" banks. A
listing of the Group banks is presented as follows:

Five Year
Date Date Acquired Deposits as of Compound Deposit
Chartered by CCBG December 31, 1996 Growth Rate
(000's Omitted)

*Capital City Bank January 1, 1995 * $732,141 10.4%
Tallahassee, Florida

Levy County State Bank September 18, 1948 January 1, 1985 75,756 3.3%
Chiefland, Florida

Farmers & Merchants October 18, 1911 February 1, 1986 35,687 5.8%
Bank of Trenton
Trenton, Florida

Branford State Bank March 13, 1911 July 31, 1989 30,030 11.1%
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.

Dividends and management fees received from the Group banks are the
Company's only source of income. Dividend payments by the Group banks
to CCBG depend on the capitalization, earnings and projected growth
of the Group banks, and are limited by various regulatory
restrictions. See the section entitled "Regulation and Supervision"
and Note 12 in the Notes to Consolidated Financial Statements for
additional information.

The Company had a total of 573 (full-time equivalent) employees at
March 1, 1997. Page 12 contains 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, originating residential mortgage loans, providing
data processing services, trust services, retail brokerage services
and a broad range of other financial services to corporate and
individual customers, governmental entities and correspondent banks.
As of March 1, 1997, 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 13 of the 26 financial institutions.

Through the merger with First Federal Bank, Capital City Bank
substantially increased its origination of conventional residential
mortgage loans, both with fixed and adjustable interest rates. While
a substantial portion of the adjustable-rate residential mortgage
loans are originated for Capital City Bank's portfolio, virtually all
of the fixed-rate loans have been originated under terms and
conditions which permit their resale in the secondary mortgage market.
Under current policy, whole loans are packaged and sold, in some
circumstances with servicing retained, in the secondary market as soon
as possible after origination, market conditions permitting. In the
four years preceding the merger with Capital City Bank, First Federal
Bank substantially increased its secondary market activity primarily
through the sale of newly originated fixed-rate loans in order to
increase its non-interest income, manage its interest rate risk and
provide liquidity to meet the needs of its customers. Capital City
Bank now conducts its mortgage banking business primarily through the
Bank as opposed to through the mortgage company subsidiary.

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
Florida through various interconnected ATM networks.

Trust Services

Capital City Trust Company provides fiduciary services to clients in
the following ways: (1) as trustee of living trusts and trusts under
will; (2) as personal representative to administer estate settlement;
(3) as guardian of the property in court guardianship appointments;
(4) as an investment manager and custodian of assets in agency
accounts; and (5) as a trustee or custodian for assets in pension and
profit sharing plans. The market value of trust assets totaled $472.8
million at December 31, 1996, of which $131.3 million represented
assets under management.

Brokerage Services

During the fourth quarter of 1995, the Company began offering retail
investment products through its wholly-owned subsidiary, Capital City
Securities, Inc. 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.
Capital City Securities, Inc.'s brokers are licensed through Liberty
Securities Corporation and offer a full line of retail securities
products, including U.S. Government bonds, tax-free municipal bonds,
stocks, mutual funds and unit investment trusts.

Competition

The banking business in Florida is rapidly changing and CCBG and its
subsidiaries operate in a highly competitive environment, especially
with respect to services and pricing. CCBG's primary market area is
in North Florida and consists of Leon, Gadsden, Jefferson, Levy,
Gilchrist, Suwannee, Taylor, Hernando, Madison, Pasco and Citrus
counties. In these markets, the Group banks compete against a wide
range of banking and nonbanking institutions including savings and
loan associations, credit unions, money market funds and other
investment vehicles, mutual fund advisory companies, mortgage banking
companies, investment banking companies, finance companies and other
types of financial institutions.

All of Florida's major banking concerns have a presence in Leon
County. Capital City Bank's Leon County deposits totaled $454.3
million, or 52.4%, of the Company's consolidated deposits at December
31, 1996.

The following table 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*
1996 1995 1994

Capital City Bank:
Citrus County 4.4% 4.6% 3.6%
Gadsden County 27.5% 28.2% 30.4%
Hernando County 2.0% - -
Jefferson County 27.3% 27.6% 27.6%
Leon County 23.9% 22.2% 24.0%
Pasco County 1.5% - -
Madison County 28.5% - -
Taylor County 43.3% - -
Levy County State Bank 33.4% 33.7% 33.8%
Farmers & Merchants Bank of Trenton 52.8% 53.7% 55.4%
Branford State Bank 16.2% 16.3% 14.5%

* Obtained from the September 30 Office Level Report published by the Florida
Bankers Association for each year.

The following table 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, 1996.

Number of Number of Commercial
County Commercial Banks Bank Offices

Citrus 10 31
Gadsden 4 9
Gilchrist 2 4
Hernando 9 32
Jefferson 2 2
Leon 12 64
Levy 4 12
Madison 3 5
Pasco 13 79
Suwannee 4 6
Taylor 3 5

SUPERVISION AND REGULATION

Numerous federal and state laws and regulations govern the
organization and operations of bank holding companies and their
banking subsidiaries. CCBG, 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,
and Capital City Bank's trust company, mortgage company and discount
brokerage subsidiaries, 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
subsidiary banks, 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 Federal Reserve Bank
Board. Similar prior approval requirements exist for certain changes
in the ownership of the voting securities of a bank holding company.

Additionally, the BHC Act prohibits a bank holding company, with
certain limited exceptions, from (1) acquiring or retaining direct or
indirect ownership or control of more than 5% of the outstanding
voting stock of any company which is not a bank or bank holding
company, or (2) engaging directly or indirectly in activities other
than those of banking, managing or controlling banks, or performing
services for its subsidiaries unless such non-banking business is
determined by the Federal Reserve to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto.

The recent enactment of the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 ("EGRPRA"), however, streamlines the nonbanking
activities application process for well capitalized and well managed
bank holding companies. Under EGRPRA, qualified bank holding
companies may commence a regulatory approved nonbanking activity
without prior notice to the Federal Reserve; written notice is merely
required within ten days after commencing the activity. Also, under
EGRPRA, the prior notice period is reduced to 12 business days in the
event of any nonbanking acquisition or share purchase, assuming the
size of the acquisition does not exceed 10 percent of risk-weighted
assets of the acquired bank holding company and the consideration does
not exceed 15 percent of Tier I capital. This prior notice
requirement also applies to commencing a nonbanking activity de novo
which has been previously approved by order of the Federal Reserve,
but not yet implemented by regulations.

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 paperwork reduction and regulatory
improvements, small business and commercial real estate loan
securitization, truth-in-lending amendments on high cost mortgages,
strengthening of the independence of certain financial regulatory
agencies, money laundering, flood insurance reform and extension of
certain statutes of limitation.

Florida has responded to the enactment of the Interstate Banking Act
by enacting the Florida Interstate Branching Act (the "Florida
Branching Act") which is to become effective on May 31, 1997. The
purpose of the Florida Branching Act is to permit interstate
branching, effective June 1, 1997, through merger transactions under
the Interstate Banking Act. Under the Florida Branching Act, with the
prior approval of the Florida Department of Banking and Finance, a
Florida bank may establish, maintain and operate one or more branches
in a state other than the state of Florida pursuant to a merger
transaction in which the Florida bank is the resulting bank. In
addition, the Florida Branching Act provides that one or more Florida
banks may enter into a merger transaction with one or more out-of-
state banks, and an out-of-state bank resulting from such transaction
may maintain and operate the branches of the Florida bank that
participated in such merger. An out-of-state bank, however, shall not
be permitted to acquire a Florida bank in a merger transaction unless
the Florida bank has been in existence and continuously operated for
more than three years.

At this time, the Company is unable to predict how the Interstate
Banking Act and the Florida Branching 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
bank subsidiary exceed certain legal limits. See Note 13 in the Notes
to Consolidated 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, 1996. See the
information set forth under the heading "Liquidity and Capital
Resources" in the section of this report entitled "Financial Review,"
and also see Note 11 in the Notes to Consolidated Financial
Statements.

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:

Federal Deposit Insurance - Certain deposits of the Company's
subsidiary banks are insured by the FDIC through the Bank Insurance
Fund ("BIF") and other deposits are insured by the FDIC through the
Savings Association Insurance Fund ("SAIF"). 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 and SAIF are 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 four to 31 basis points for BIF deposits. The FDIC
further reduced the BIF assessment schedule by an additional four
basis points for the 1996 calendar year so that most BIF members paid
only the statutory minimum semiannual assessment of $1,000. During
this same period, the FDIC retained the existing assessment rate
schedule applicable to SAIF deposits of 23 cents to 31 cents per $100
of domestic deposits, depending on the institution's risk
classification.

On September 30, 1996, the Deposit Insurance Funds Act of 1996
("DIFA") was enacted and signed into law. DIFA was intended to reduce
the amount of semi-annual FDIC insurance premiums for savings
association deposits acquired by banks to the same levels assessed for
deposits insured by BIF. To accomplish this reduction, DIFA provided
for a special one-time assessment imposed on deposits insured by SAIF
to recapitalize SAIF and bring it up to statutory required levels.
This one-time assessment occurred in the third quarter of 1996. As a
result, beginning in 1997, both BIF and SAIF deposits were assessed at
the same rate of 0 to 27 basis points depending on risk
classification.

Effective January 1, 1997, however, DIFA also separated from the SAIF
assessments the Financing Corporation ("FICO") assessments which
service the interest on its bond obligations. According to the FDIC's
risk-related assessment rate schedules, the amount assessed on
individual institutions by the FICO will be in addition to the amount
paid for deposit insurance. FICO assessment rates for the first
semiannual period of 1997 were set at 1.30 basis points annually for
BIF-assessable deposits and 6.48 basis points annually for SAIF-
assessable deposits. These rates are subject to quarterly adjustment
to reflect changes in the assessment basis for the BIF and the SAIF.
By law, the FICO rate on BIF-assessable deposits must be one-fifth the
rate on SAIF-assessable deposits until the insurance funds are merged
as specified in DIFA or until January 1, 2000, whichever occurs first.

Supervisory Reforms - FDICIA requires the federal banking agencies and
the FDIC, as insurer, to take prompt corrective 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 law to which the Company and its banking subsidiaries are
subject is the Community Reinvestment Act of 1977 ("CRA"). The CRA
requires a financial institution to help meet the credit needs of its
entire community, including low-income and moderate-income areas. On
May 3, 1995, the federal banking agencies issued final regulations
which change the manner in which the regulators measure a bank's
compliance with the CRA obligations. The final regulations adopt a
performance-based evaluation system which bases CRA ratings on an
institution's actual lending, service and investment performance,
rather than the extent to which the institution conducts needs
assessments, documents community outreach or complies with other
procedural requirements. Federal banking agencies may take CRA
compliance into account when regulating and supervising bank and
holding company activities; for example, CRA performance may be
considered in approving proposed bank acquisitions.

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 SAIF, 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 1996 totaled
approximately $65,000.

As of March 1, 1997 the Company had 36 banking locations. Of the 36
locations, the Company leases either the land or buildings (or both)
at four locations and owns the land and buildings at the remaining 32.

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

As of February 3, 1997, the common stock of CCBG began trading on the
NASDAQ National Market under the symbol CCBG. On March 3, 1997, the
high and low closing bid prices for CCBG common stock were $62.00 and
$61.125, respectively. Such quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commissions and may not
necessarily represent actual transactions.

Prior to February 3, 1997, and for the last two fiscal years, there
has been no established trading market for the CCBG common stock, and
therefore, no bid or sale quotations were generally available during
such periods. Based on sales of stock of which the Company has
knowledge, the stock has traded in a range of $30.00 to $42.00 per
share for the two-year period ended December 31, 1996, with the most
recent trades during such period at $42.00 per share. As of March 3,
1997, there were approximately 1,005 holders of CCBG common stock.

The Board of Directors has declared cash dividends for CCBG shareholders
for the last two consecutive fiscal years as follows:

Declaration Per
Date Record Date Share

May 19, 1995 June 16, 1995 $.11
November 16, 1995 December 15, 1995 $.89
February 23, 1996 March 15, 1996 $.27
May 23, 1996 June 12, 1996 $.27
August 23, 1996 September 16, 1996 $.27
November 22, 1996 December 27, 1996 $.30

Previously, dividends were declared and paid on a semi-annual basis.
Beginning in 1996, the Board of Directors elected
to convert the dividend schedule from semi-annual to quarterly.

Future payment of dividends will be subject to determination and declaration
by the Board of Directors.

On February 21, 1997, the Company declared a two-for-one stock split for
shareholders of record on March 14, 1997, to be effective April 1, 1997.

Item 6. Selected Financial And Other Data

For the Years Ended December 31,
1996 1995 1994 1993 1992
(Dollars in Thousands, Except Per Share Data)

Interest Income $ 66,171 $ 54,477 $ 47,891 $ 46,395 $ 48,306
Net Interest Income 40,752 33,989 33,166 31,555 29,775
Provision for Loan Losses 1,463 293 1,246 960 1,216

Net Income 11,360 9,522 8,825 8,244(1) 8,376

Per Common Share:
Net Income $ 3.96 $ 3.34 $ 3.10 $ 2.82(1)$ 2.86
Cash Dividends Declared 1.11 1.00 .91 .83 .78
Book Value 30.98 28.44 25.44 23.56 21.59

Based on Net Income:
Return on Average Assets 1.25% 1.25% 1.18% 1.14%(1) 1.27%
Return on Average Equity 13.48 12.32 12.51 12.43 (1) 13.71
Dividend Payout Ratio 28.03 29.94 29.34 29.44 27.25

Averages for the Year:
Loans, Net of Unearned
Interest $ 560,986 $432,313 $406,873 $381,807 $358,876
Earning Assets 815,467 681,186 666,919 651,042 598,127
Assets 910,658 763,697 745,334 722,286 662,150
Deposits 770,492 657,384 647,254 630,324 573,162
Long-Term Debt 10,120 71 1,144 1,381 3,156
Shareholders' Equity 84,287 77,259 70,563 66,328 61,078

Year-End Balances:
Loans, Net of Unearned
Interest $ 672,196 $443,973 $420,804 $399,424 $369,911
Earning Assets 905,428 716,170 645,832 675,273 619,929
Assets 1,021,399 813,659 742,630 762,335 686,966
Deposits 866,696 699,579 648,174 662,745 597,497
Long-Term Debt 18,072 1,982 - 1,900 2,000
Shareholders' Equity 89,500 81,158 72,400 67,140 63,169
Equity to Assets Ratio 8.76% 9.97% 9.75% 8.81% 9.20%

Other Data:
Average Shares
Outstanding 2,866,399 2,853,234 2,847,492 2,924,022 2,932,123
Shareholders of Record* 1,005 933 761 754 748
Banking Locations* 36 30 29 30 27
Full-Time Equivalent
Employees* 573 503 489 476 466

*As of March 1st of the following year.

(1) Income before the effect of a change in accounting for income taxes was
$8,728 or $2.99 per share. Return on average assets and return on average
equity, both before the accounting change, were 1.21% and 13.15%,
respectively.

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations

FINANCIAL REVIEW

This section provides supplemental information which should be read in
conjunction with the consolidated financial statements and related
notes. The Financial Review is divided into three subsections entitled
Earnings Analysis, Financial Condition, and Liquidity and Capital
Resources. Information therein should facilitate a better
understanding of the major factors and trends which affect the
Company's earnings performance and financial condition, and how the
Company's performance during 1996 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."

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 noted as such.

On July 1, 1996, the Company completed its acquisition of First
Financial Bancorp, Inc. and its wholly-owned subsidiary, First Federal
Bank (collectively referred to as "First Financial"). The acquisition
was accounted for as a purchase. Operating results of First Financial
are included in the Company's consolidated financial statements
presented herein for the period July 1, through December 31, 1996.
Financial comparisons to prior year periods are not necessarily
comparable due to the impact of the acquisition.

First Financial, with assets of $244 million on the date of
acquisition, was acquired for $22.00 per share in cash, or a total
purchase price of approximately $20 million. The addition of First
Financial expanded the number of counties served by the Company from
seven to eleven and increased the number of offices from thirty-one to
thirty-six. On December 6, 1996, First Federal Bank was merged into
the Company's lead bank, Capital City Bank, increasing the assets of
Capital City Bank to $865 million as of year-end. See Note 2 in the
Notes to Consolidated Financial Statements for further information
pertaining to the First Financial acquisition.

EARNINGS ANALYSIS

In 1996, the Company's earnings were $11.4 million, or $3.96 per
share. This compares to earnings of $9.5 million, or $3.34 per share
in 1995, and $8.8 million, or $3.10 per share in 1994.

On a per share basis, earnings increased 18.6% in 1996 versus 7.7% in
1995. Growth in operating revenues (defined as net interest income
plus noninterest income) of $9.9 million, or 21.0%, and the
acquisition of First Financial were the primary factors contributing
to the higher level of earnings in 1996. 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,
1996 1995 1994

Interest Income $66,171 $54,477 $47,891
Taxable Equivalent Adjustments 1,771 1,591 1,657
Total Interest Income 67,942 56,068 49,548
Interest Expense 25,419 20,488 14,725
Net Interest Income 42,523 35,580 34,823
Provision for Loan Losses 1,463 293 1,246
Taxable Equivalent Adjustments 1,771 1,591 1,657
Net Interest Income After Provision
for Loan Losses 39,289 33,696 31,920
Noninterest Income 16,316 13,170 13,009
Noninterest Expense 39,255 33,466 32,711
Income Before Income Taxes 16,350 13,400 12,218
Income Taxes 4,990 3,878 3,393
Net Income $11,360 $ 9,522 $ 8,825
Net Income Per Share $ 3.96 $ 3.34 $ 3.10

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 1996, taxable-equivalent net interest income increased $6.9
million, or 19.5%. This follows an increase of $757,000, or 2.2% in
1995, and $1.6 million, or 4.8% in 1994. During 1996, 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. The growth in earning assets was
significantly impacted by the First Financial acquisition which
contributed in excess of $100 million to average earning assets for
the full year.

Table 2
AVERAGE BALANCES AND INTEREST RATES
(Taxable Equivalent Basis - Dollars in Thousands)

1996 1995 1994
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate

Assets:
Loans, Net of Unearned
Interest (1)(2) $560,986 $51,999 9.27% $432,313 $40,872 9.45% $406,873 $35,516 8.73%
Taxable Investment
Securities 138,982 8,648 6.22 139,936 7,966 5.69 146,789 7,271 4.95
Tax-Exempt Investment
Securities (2) 73,857 5,106 6.91 70,773 4,989 7.05 71,683 5,092 7.10
Funds Sold 41,642 2,189 5.26 38,164 2,241 5.87 41,574 1,669 4.02
Total Earning Assets 815,467 67,942 8.33 681,186 56,068 8.23 666,919 49,548 7.43
Cash & Due From Banks 50,302 49,075 46,445
Allowance for Loan
Losses (7,374) (7,374) (7,766)
Other Assets 52,263 40,810 39,736
TOTAL ASSETS $910,658 $763,697 $745,334

Liabilities:
NOW Accounts $102,453 $ 1,877 1.83% $ 91,060 $1,806 1.98% $ 92,957 $ 1,809 1.95%
Money Market Accounts 85,256 2,523 2.96 70,188 2,108 3.00 76,173 1,731 2.27
Savings Accounts 86,437 1,813 2.10 85,408 1,942 2.27 107,741 2,597 2.41
Other Time Deposits 325,453 16,867 5.18 249,827 13,526 5.41 214,068 7,853 3.67
Total Interest
Bearing Deposits 599,599 23,080 3.85 496,483 19,382 3.90 490,939 13,990 2.85
Funds Purchased 25,181 1,229 4.88 19,308 1,053 5.45 18,291 650 3.55
Other Short-Term
Borrowings 7,016 422 6.01 1,159 49 4.23 844 31 3.67
Long-Term Debt 10,120 688 6.80 71 4 5.63 1,144 54 4.72
Total Interest
Bearing Liabilities 641,916 25,419 3.96 517,021 20,488 3.96 511,218 14,725 2.88
Noninterest Bearing
Deposits 170,893 160,901 156,315
Other Liabilities 13,562 8,516 7,238

TOTAL LIABILITIES 826,371 686,438 674,771

Shareholders' Equity:
Common Stock 29 31 31
Additional Paid
In Capital 4,846 5,867 5,852
Retained Earnings 79,412 71,361 64,680
TOTAL SHAREHOLDERS'
EQUITY 84,287 77,259 70,563
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $910,658 $763,697 $745,334

Interest Rate Spread 4.37% 4.27% 4.55%
Net Interest Income $42,523 $35,580 $ 34,823
Net Interest Margin (3) 5.21% 5.22% 5.22%

(1) Average balances include nonaccrual loans. Interest income includes fees
on loans of approximately $2,241,000, $1,469,000 and $1,619,000 in 1996,
1995, and 1994, respectively.
(2) Interest income includes the effects of taxable equivalent adjustments
using a 35% tax rate for 1996 and 34% for prior years 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)
(Taxable Equivalent Basis - Dollars in Thousands)

1996 Change From 1995 1995 Change From 1994
Due To Average Due To Average
Total Volume(3) Rate Total Volume Rate
Earning Assets:

Loans, Net of Unearned Interest(2) $11,127 $12,160 $(1,033) $5,356 $2,221 $3,135
Investment Securities:
Taxable 682 (54) 736 695 (339) 1,034
Tax-Exempt (2) 117 217 (100) (103) (65) (38)
Funds Sold (52) 204 (256) 572 (137) 709

Total 11,874 12,527 (653) 6,520 1,680 4,840

Interest Bearing Liabilities:
NOW Accounts 71 226 (155) (3) (37) 34
Money Market Accounts 415 452 (37) 377 (136) 513
Savings Accounts (129) 23 (152) (655) (538) (117)
Other Time Deposits 3,341 4,091 (750) 5,673 1,312 4,361
Funds Purchased 176 320 (144) 403 36 367
Other Short-Term Borrowings 373 248 125 18 12 6
Long-Term Debt 684 566 118 (50) (50) -

Total 4,931 5,926 (995) 5,763 599 5,164

Change in Net Interest Income $ 6,943 $6,601 $342 $ 757 $l,081 $ (324)

(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 changes.

(2) Interest income includes the effects of taxable equivalent adjustments
using a 35% tax rate in 1996 and 34% for prior years to
adjust interest on tax-exempt loans and securities to a taxable
equivalent basis.

(3) A significant portion of the average volume increase can be directly
attributed to the acquisition of First Financial on July 1, 1996.

Subsequent to the first quarter of 1995, interest rates began to fall
and continued their decline through the end of 1995, only to begin
rising again early in 1996. While rates on maturities of less than
one year are relatively unchanged from year-end 1995, rates on
maturities of one year and beyond have increased, thus steepening the
yield curve. During 1996 both the average prime and fed funds rates
declined slightly relative to their 1995 levels.

For the year 1996, taxable equivalent interest income increased $11.9
million, or 21.2%, over 1995, compared to an increase of $6.5 million,
or 13.2% in 1995 over 1994. The Company's taxable equivalent yield on
average earning assets of 8.33% represents a 10 basis point increase
over 1995, compared to an 80 basis point improvement in 1995 over
1994. In 1996 interest income was positively impacted by loan growth
and the acquisition of First Financial, which contributed
approximately $8.9 million to interest income. The higher yield in
1996 reflects a more favorable earning asset mix as the loan
portfolio, which is the largest and highest yielding component of
earning assets, increased from 63.4% in the fourth quarter of 1995 to
72.6% in the comparable quarter of 1996. The significant improvement
in yield in 1995 reflects the overall level of interest rates and a
favorable earning asset mix as compared to 1994.

Interest expense increased $4.9 million, or 24.1% over 1995, compared
to an increase of $5.8 million, or 39.1% in 1995 over 1994. The
average rate paid on interest bearing liabilities was 3.96% in 1996
and 1995, compared to 2.88% in 1994. The higher level of interest
expense in 1996 is attributable to the acquisition of First Financial
which, including $.5 million in interest on acquisition financing,
added $5.2 million to total interest expense. The level of interest
expense was also impacted by a reduction in rates on the Company's non-
maturity deposits and the favorable repricing of approximately $31.0
million in promotional certificates of deposit which were issued late
in the first quarter of 1995 and repriced in January of 1996.
Although there was no change from 1995 to 1996 in the average rate
paid for the full year, the acquisition of First Financial increased
the Company's average rate paid on interest bearing liabilities from
3.68% in the second quarter of 1996 to 4.09% in the fourth quarter.
The higher average rate for the fourth quarter is attributable to the
mix of the acquired deposits. Certificates of deposit, generally a
higher cost deposit product, totaled $150 million, or 75% of First
Financial's total deposits. As a percent of consolidated deposits,
certificates increased to 45.5% in the fourth quarter of 1996 from
38.9% in the comparable quarter of 1995. The sharp increase in the
level of interest expense and the average rate paid from 1994 to 1995
is attributable to the level of interest rates, issuance of $31.0
million in promotional certificates of deposit and a general shift in
depositor's preference from non-maturity deposits to certificates.

The Company's interest rate spread (defined as the taxable equivalent
yield on average earning assets less the average rate paid on interest
bearing liabilities) increased ten basis points in 1996 and decreased
28 basis points in 1995. The increase in 1996 over 1995 is
attributable to the higher yield on earning assets, while the
reduction in spread in 1995 over 1994 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 5.21% in 1996, compared to 5.22% in 1995 and 1994. Growth
in the loan portfolio has enabled the Company to maintain stable
margins over the last three years. During the first half of 1996,
margins improved to a level of 5.53% during the second quarter. In
the second half, however, the margin averaged 5.02%, reflecting the
acquisition of First Financial and resulting in a net interest margin
for the year of 5.21%.

A further discussion of the Company's earning assets and funding
sources can be found in the section entitled "Financial Condition."

Provision for Loan Losses

The provision for loan losses was $1.5 million in 1996 versus $293,000
in 1995 and $1.2 million in 1994. The provision approximates total
net charge-offs for 1996. The Company's credit quality measures
continue to improve with a nonperforming loans ratio of .44% compared
to 1.05% at year-end 1995, and a net charge-off ratio of .27% versus
.32% in 1995.

At December 31, 1996, the allowance for loan losses totaled $8.2
million compared to $6.5 million in 1995. At year-end 1996, the
allowance represented 1.22% of total loans and 276% of nonperforming
loans. Management considers the allowance to be adequate based on the
current level of nonperforming loans and the potential for loss
inherent in the portfolio at year-end. See the section entitled
"Financial Condition" for further information regarding the allowance
for loan losses. Selected loss coverage ratios are presented below:

1996 1995 1994
Provision for Loan Losses as a
Multiple of Net Charge-offs 1.0x .2x 1.0x
Pre-tax Income Plus Provision
for Loan Losses as Multiple
of Net Charge-offs 11.7x 10.0x 10.4x

Noninterest Income

In 1996, noninterest income increased 23.9% and represented 28.6% of
operating income, compared to 1.2% and 27.9%, respectively, in 1995.
Overall, the acquisition of First Financial did not significantly
impact noninterest income during 1996. The increase is principally
attributable to the implementation of recommendations resulting from a
profit enhancement program conducted in the latter half of 1995 and
repricing of the Bank's service fees. Factors affecting noninterest
income are discussed below.

Service charges on deposit accounts increased $2.0 million, or 35.8%,
in 1996, compared to an increase of $241,000, or 4.5%, in 1995.
Although 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, the increase in 1996 is primarily
attributable to an increase in bank service fees which went into
effect on July 1.

Data processing revenues increased $361,000, or 13.8%, in 1996 versus
an increase of $174,000, or 7.1%, in 1995. The data processing center
provides computer services to both financial and non-financial clients
in North Florida and South Georgia. In recent years, revenue gains
have been attributable to growth in processing for both financial and
non-financial clients. In 1996, processing revenues for non-financial
entities represented approximately 55% of the total processing
revenues, up from 52% in 1995.

In 1996, trust fees increased $222,000, or 23.6%, compared to
$262,000, or 38.5% in 1995. The increase in 1996 is attributable to a
price increase, effective January 1, and growth in managed assets. At
year-end 1996 assets under management totaled $131.3 million,
reflecting growth of $15.3 million, or 13.2%. 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 increased $12.6 million, or 12.2%.

The net gains and losses recognized in 1996 were related to bonds
called during the year and loan securitization, and are 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 $7.0 million in securities
(including U.S. Governments and municipals) and reinvest the proceeds
in higher yielding securities.

Other noninterest income increased $500,000, or 12.6%, in 1996 versus
a decrease of $671,000, or 14.5% in 1995. The increase in 1996 is
attributable to higher check printing income and gains recognized on
the sale of real estate loans. The decrease in 1995 is attributable
to gains on the sale of real estate 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 attributable to higher volume.

Noninterest income as a percent of average assets was 1.79% in 1996
compared to 1.72% in 1995 and 1.75% in 1994.

Noninterest Expense

Total noninterest expense for 1996 was $39.3 million, an increase of
$5.8 million, or 17.3%, over 1995, compared with an increase of
$755,000, or 2.3% in 1995 over 1994. Excluding the acquisition of
First Financial, noninterest expense increased approximately $2.5
million, or 7.4%. Factors impacting the Company's noninterest expense
during 1996 and 1995 are discussed below.

The Company's aggregate compensation expense totaled $21.0 million, an
increase of $3.1 million, or 17.1%($1.5 million, or 8.4% excluding
First Financial), over 1995. Normal raises and the addition of 80
associates from First Financial contributed to a $2.1 million, or
14.4%, increase in salaries. Retirement expense increased $473,000,
or 52.5%, due to higher costs associated with the Company's pension
plan and adoption of a Supplemental Employee Retirement Plan in 1996.
Additionally, a higher stock price and an increase in the number of
associates covered under the Company's Associate Incentive Plan
resulted in a $316,000, or 74.5% increase in other compensation
expense. In 1995, total compensation expense increased $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 Associate Incentive Plan accounted for the remaining
increase of $342,000.

Occupancy expense (including furniture, fixtures & equipment) was up
by $1.1 million, or 18.1%, in 1996, compared to $631,000, or 12.0%, in
1995. The increase in both years is attributable to higher
depreciation expense which increased $446,000 and $447,000,
respectively, and maintenance/repairs which increased $272,000 and
$195,000, respectively. First Financial added approximately $470,000
to total occupancy expense in 1996.

Other noninterest expense increased $1.6 million, or 17.1%, in 1996,
compared to a decrease of $748,000, or 7.2%, in 1995. The increase in
1996 is attributable to the acquisition of First Financial which added
$1.3 million to other noninterest expense. For 1996, deposit
insurance premiums were substantially eliminated for well capitalized
banks, resulting in a reduction in premiums of $600,000 over 1995.
The reduction was offset by a $607,000 increase in professional fees
attributable to the hiring of consultants to assist with various
corporate initiatives including data processing conversions,
technology, restructurings and the development of a strategic plan.
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.
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.

Net noninterest expense (defined as noninterest income minus
noninterest expense) as a percent of average assets was 2.52% in 1996
compared to 2.66% in 1995 and 2.64% in 1994.

Income Taxes

The consolidated provision for federal and state income taxes was $5.0
million in 1996 compared to $3.9 million in 1995 and $3.4 million in
1994. The increase in the tax provision over the last three years is
primarily attributable to the higher level of taxable income.

The effective tax rate was 30.5% in 1996, 28.9% in 1995, and 27.8% in
1994. 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 20.1% in 1996,
23.0% in 1995, and 25.1% in 1994.

FINANCIAL CONDITION

Average assets increased $147.0 million, or 19.2%, from $763.7 million
in 1995 to $910.7 million in 1996. Average earning assets increased
to $815.5 million in 1996, a $134.3 million, or 19.7% increase over
1995. Excluding First Financial, average assets and average earning
assets increased $32.0 million, or 4.2%, and $24.7 million, or 3.6%,
respectively. In 1996, roughly 78% of the average asset growth and
90% of the average deposit growth is attributable to the acquisition.
Average loans increased $128.7 million, or 29.8%, and accounted for
96% of the total growth in average earning assets. Loan growth in 1996
was funded through deposit growth and maturities in the investment
portfolio.

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
1996. Loan demand was steady and growth was spread evenly throughout
the year. The First Financial acquisition increased the number of
markets served and enhanced the Company's line of mortgage products
and services. Price and product competition continued to strengthen
during 1996 and there was increased demand for fixed rate financing.
Real estate lending, an area of primary focus, continued to improve.
Other areas reflecting stronger demand included home equity and
indirect automobile lending. Following the Company's restructuring in
1995, there has been increased emphasis on product marketing.

Although management is continually evaluating alternative sources of
revenue, 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
consistently strives to identify 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)

1995 to Percentage Components
1996 of Total of Total Earning Assets
Change Change 1996 1995 1994

Loans:
Commercial, Financial
and Agricultural $ 9,811 7.3% 7.1% 7.1% 6.6%
Real Estate - Construction 5,883 4.3 3.9 3.7 3.1
Real Estate - Mortgage 92,615 69.0 42.8 37.7 38.0
Consumer 20,364 15.2 15.0 15.0 13.3
Total Loans 128,673 95.8 68.8 63.5 61.0

Securities:
Taxable (954) (.7) 17.0 20.5 22.0
Tax-Exempt 3,084 2.3 9.1 10.4 10.8
Total Securities 2,130 1.6 26.1 30.9 32.8

Funds Sold 3,478 2.6 5.1 5.6 6.2

Total Earning Assets $134,281 100.0% 100.0% 100.0% 100.0%

The Company's average loan-to-deposit ratio increased from 65.8% in
1995 to 72.8% in 1996 and reached a level of 78.4% in the fourth
quarter. The average loan-to-deposit ratio for 1994 was 62.9%. This
ratio for 1996 was significantly impacted by First Financial, which at
the time of acquisition had a loan-to-deposit ratio of 93.6%.

Real estate construction and mortgage loans, combined, represented
71.5% of total loans (net of unearned interest) in 1996 versus 64.8%
in 1995. See the section entitled "Risk Element Assets" for a
discussion concerning loan concentrations.

The composition of the Company's loan portfolio at December 31, for
each of the past five years is shown in Table 5. Table 6 arrays the
Company's total loan portfolio as of December 31, 1996, based upon
maturities. 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 30.2% in 1995 to 29.0% in
1996.

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 past five years.

Table 5
LOANS BY CATEGORY
(Dollars in Thousands)

As of December 31,
1996 1995 1994 1993 1992

Commercial, Financial and
Agricultural $ 57,023 $ 46,149 $ 39,288 $ 46,963 $ 57,188
Real Estate - Construction 30,594 28,391 24,314 22,968 19,103
Real Estate - Mortgage 449,905 259,503 255,755 242,741 212,080
Consumer 137,153 113,736 106,656 93,895 89,848
Total Loans $674,675 $447,779 $426,013 $406,567 $378,219

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 $ 38,381 $ 13,618 $ 5,024 $ 57,023
Real Estate 334,882 126,220 19,397 480,499
Consumer 45,409 91,093 651 137,153
Total $418,672 $230,931 $25,072 $674,675

Loans with Fixed Rates $ 48,302 $129,361 $18,032 $195,695
Loans with Floating or
Adjustable Rates 370,370 101,570 7,040 478,980

Total $418,672 $230,931 $25,072 $674,675

The allowance for loan losses at December 31, 1996 of $8.2 million
compares to $6.5 million at year-end 1995. First Financial had an
established allowance at the time of acquisition of $1.8 million. The
allowance as a percent of total loans declined from 1.46% in 1995 to
1.22% in 1996. The lower percentage reflects 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, 1996, 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 past 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,
1996 1995 1994 1993 1992

Balance at Beginning of Year $6,474 $7,551 $7,594 $7,585 $7,670
Acquired Reserves 1,769 - - - -
Charge-Offs:
Commercial, Financial
and Agricultural 466 520 575 556 511
Real Estate-Construction - - - - 33
Real Estate-Mortgage 91 139 315 81 460
Consumer 1,585 1,237 865 884 929
Total Charge-Offs 2,142 1,896 1,755 1,521 1,933

Recoveries:
Commercial, Financial
and Agricultural 200 157 104 198 231
Real Estate - Construction 3 - - - -
Real Estate - Mortgage - - 12 8 7
Consumer 412 369 350 364 394
Total Recoveries 615 526 466 570 632

Net Charge-Offs 1,527 1,370 1,289 951 1,301

Provision for Loan Losses 1,463 293 1,246 960 1,216

Balance at End of Year $8,179 $6,474 $7,551 $7,594 $7,585

Ratio of Net Charge-Offs During
Year to Average Loans Out-
standing, Net of Unearned Interest .27% .32% .32% .25% .36%

Allowance for Loan Losses as a
Percent of Loans, Net of Un-
earned Interest, at End of Year 1.22% 1.46% 1.79% 1.90% 2.05%

Allowance for Loan Losses as a
Multiple of Net Charge-Offs 5.36x 4.73x 5.86x 7.99x 5.83x

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 $1.7 million, or 36.7%,
from a level of $4.7 million at December 31, 1995 to $3.0 million at
December 31, 1996. During 1996, loans totaling approximately $5.1
million were added, while loans totaling $6.8 million were removed
from nonaccruing status. Of the $5.1 million added, $3.5 million were
acquired through the acquisition of First Financial and the remaining
$1.6 million consisted of multiple small credits. Where appropriate,
management has allocated specific reserves to absorb anticipated
losses. Of the $6.8 million removed from the nonaccrual category,
$2.0 million consists of principal reductions, $1.9 million
represented loans transferred to ORE, $1.4 million in loans were
refinanced, $1.2 million consists of loans brought current and
returned to an accrual status and $.3 million were charged off. A
majority of the Company's charge-offs in 1996 were in the consumer
portfolio where loans are charged off based on past due status and are
not recorded as nonaccruing loans.

Table 8
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars in Thousands)

1996 1995 1994 1993 1992
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 $ 524 8.5% $ 609 10.3% $ 442 9.3% $ 936 11.6% $1,416 15.1%
Real Estate:
Construction 237 4.5 152 6.3 187 5.7 501 5.6 647 5.0
Mortgage 2,841 66.7 2,484 58.0 2,938 60.0 2,459 59.7 2,715 56.1
Consumer 1,623 20.3 1,044 25.4 963 25.0 420 23.1 425 23.8
Not Allocated 2,954 - 2,185 - 3,021 - 3,278 - 2,382 -
Total $8,179 100.0% $6,474 100.0% $7,551 100.0% $7,594 100.0% $7,585 100.0%

Table 9
RISK ELEMENT ASSETS
(Dollars in Thousands)

As of December 31,
1996 1995 1994 1993 1992

Nonaccruing Loans $2,704 $2,996 $4,278 $ 9,353 $ 6,987
Restructured 262 1,686 1,694 65 169
Total Nonperforming Loans 2,966 4,682 5,972 9,418 7,156
Other Real Estate 1,489 1,001 1,581 3,466 4,416
Total Nonperforming Assets $4,455 $5,683 $7,553 $12,884 $11,572

Past Due 90 Days or More $ 536 $ 273 $ 258 $ 104 $ 2,564

Nonperforming Loans to Loans,
Net of Unearned Interest .44% 1.05% 1.42% 2.36% 1.93%
Nonperforming Assets to Loans,
Net of Unearned Interest,
Plus Other Real Estate .66% 1.28% 1.79% 3.20% 3.09%
Nonperforming Assets to Capital(1) 4.56% 6.49% 9.45% 17.24% 16.36%
Reserve to Nonperforming Loans 275.76% 138.27% 126.44% 80.64% 105.99%

(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 generally recognized only when
received. Cash collected on nonaccrual loans is applied against the
principal balance or recognized as interest income based upon
management's expectations as to the ultimate collectibility of
principal and interest in full. If nonaccruing loans had been on a
fully accruing basis, interest income recorded would have been
$180,000 higher for the year ended December 31, 1996.

Restructured loans are those with reduced interest rates or deferred
payment terms due to deterioration in the financial position of the
borrower.

Other real estate totaled $1.5 million at December 31, 1996, versus
$1.0 million at December 31, 1995. 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
1996, the Company added properties totaling $2.2 million (including
$1.1 million acquired through First Financial) and liquidated,
partially or completely, properties totaling $1.7 million, resulting
in a net increase in other real estate of $.5 million. Management does
not anticipate any significant losses associated with other real
estate.

Potential problem loans are defined as those loans which are now
current but where management has doubt as to the borrower's ability to
comply with present loan repayment terms. Potential problem loans
totaled $1.0 million at December 31, 1996.

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, accounted for 86.7% 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, 1996, approximately 71.5% of the portfolio consisted of
real estate loans. Residential properties comprise approximately 60%
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, 1996, 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

In 1996, the Company's average investment portfolio increased $2.1
million, or 1.0%, compared to a decrease of $7.8 million, or 3.6% in
1995. The $2.1 million in 1996 represents the net increase after
adding $35.2 million in securities acquired through the First
Financial acquisition. In 1995 and 1996, maturities in the investment
portfolio have been used to fund loan growth. In 1996, loan growth
represented $128.7 million, or 95.8%, of the total growth in average
earning assets of $134.3 million. As a percent of average earning
assets, the investment portfolio represented 26.1% in 1996, compared
to 30.9% in 1995. Prior to 1995 the investment portfolio, as a
percent of earning assets, had been increasing reflecting the slowdown
in loan production. At 26.1%, the portfolio is more in line with
historical levels.

In 1996, average taxable investments decreased $1.0 million, or .7%,
while tax-exempt investments increased $3.1 million, or 4.4%. 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 recent years, the tax-exempt portfolio as
a percent of average earning assets has declined from 18.9% in 1986 to
9.1% in 1996. 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. Securities are classified as held-to-
maturity, available-for-sale or trading. Following a determination by
the regulatory agencies during 1995 that the net unrealized gain
(loss) would be excluded from the computation of regulatory capital,
management transferred all securities classified as held-to-maturity
to available-for-sale. As of December 31, 1996, all securities are
classified as available-for-sale. Classifying securities as available-
for-sale offers management full flexibility in managing its liquidity
and interest rate sensitivity without adversely impacting its
regulatory capital levels. Securities in the available-for-sale
portfolio are recorded at fair value and unrealized gains and losses
associated with these securities are recorded, net of tax, as a
separate component of shareholders' equity. At December 31, 1996,
shareholders' equity included a net unrealized gain of $82,000,
compared to $968,000 at December 31, 1995. It is neither 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.

The average maturity of the total portfolio at December 31, 1996 and
1995, was 2.35 and 2.62 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, 1996, was 6.40% versus 6.20% in 1995. The
quality of the municipal portfolio at such date is depicted in the
chart on the following page. 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, 1996.

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 $47,955 64.7%
AA-1 1,198 1.6
AA 4,030 5.4
A-1 4,143 5.6
A 6,863 9.2
BAA 441 .6
Not Rated(1) 9,566 12.9
Total $74,196 100.0%

(1) Of the securities not rated by Moody's,
$4.5 million are rated "A" or higher by S&P.

Table 10
DISTRIBUTION OF AVAILABLE-FOR-SALE INVESTMENT SECURITIES

(Dollars in Thousands) 1996

Amortized Unrealized Unrealized Market
Available-for-Sale Cost Gains Losses Value

U.S. Treasury $ 40,766 $ 75 $ 9 $ 40,832
U.S. Government Agencies
and Corporations 57,381 32 376 57,037
States and Political
Subdivisions 74,196 620 117 74,699
Mortgage Backed Securities 29,266 160 257 29,169
Other Securities 5,448 4 - 5,452
Total Investment Securities $207,057 $ 891 $759 $207,189

Table 11
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES

(Dollars in Thousands) As of December 31, 1996
Weighted
Amortized Cost Market Value Average Yield(1)

U. S. GOVERNMENTS
Due in 1 year or less $ 21,970 $ 21,621 6.07%
Due over 1 year thru 5 years 75,177 75,277 6.10
Due over 5 years thru 10 years 1,000 971 6.27
Due over 10 years - - -
TOTAL 98,147 97,869 6.10

STATE & POLITICAL SUBDIVISIONS
Due in 1 year or less 9,000 9,175 7.04
Due over 1 year thru 5 years 58,329 58,875 6.58
Due over 5 years thru 10 years 4,757 4,643 6.76
Due over 10 years 2,110 2,006 7.94
TOTAL 74,196 74,699 6.68

MORTGAGE BACKED SECURITIES
Due in 1 year or less 1,454 1,423 5.92
Due over 1 year thru 5 years 11,138 11,010 6.43
Due over 5 years thru 10 years 15,436 15,506 6.70
Due over 10 years 1,238 1,230 6.49
TOTAL 29,266 29,169 6.55

OTHER SECURITIES
Due in 1 Year or less 999 1,003 7.32
Due over 1 year thru 5 years 495 495 6.09
Due over 5 years thru 10 years - - -
Due over 10 years* 3,954 3,954 7.10
TOTAL 5,448 5,452 7.05

Total Investment Securities $207,057 $207,189 6.40%

*Federal Home Loan Bank Stock and Federal Reserve Bank Stock do not have
stated maturities.

(1) Weighted average yields are calculated on the basis of the amortized cost
of the security. The weighted average yields on tax-exempt obligations are
computed on a taxable-equivalent basis using a 35% tax rate.

AVERAGE MATURITY (In Years) AS OF DECEMBER 31, 1996

U. S. Governments 1.68
State and Political Subdivisions 2.78
Mortgage Backed Securities 4.52
TOTAL 2.35

Deposits And Funds Purchased

Average total deposits increased from $657.4 million in 1995 to $770.5
million in 1996, representing an increase of $113.1 million, or 17.2%.
During the fourth quarter of 1996, deposits averaged $858.3 million.
In 1995, deposits increased $10.1 million, or 1.6%. The growth in
deposits during 1996 is attributable to the acquisition of First
Financial which accounted for 90% of the $113.1 million increase.
Beginning in 1995, the Company experienced a notable increase in
competition for deposits, in terms of both rate and product.

In 1995 and 1996, a significant portion of the Company's growth was in
certificates of deposit. At the time of acquisition, certificates of
deposit constituted 75% of First Financial's total deposits. Thus,
the acquisition further accentuated the shift in the deposit mix.
During the fourth quarter of 1996, certificates of deposit represented
45.5% of the Company's total deposits compared to 38.9% in the fourth
quarter of 1995. This shift in mix has contributed to a compression
in the net interest margin which averaged 5.03% in the fourth quarter
of 1996 versus 5.22% for the comparable quarter in 1995.

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 $5.9
million, or 30.4%.

Federal Funds Purchased and Securities Sold
Under Repurchase Agreements
(Dollars in Thousands)

1996 1995 1994

Year End Balance $28,697 $17,367 $13,964
Rate at Year End 5.97% 4.79% 5.38%
Average Balance $25,181 $19,308 $18,291
Average Rate 4.88% 5.45% 3.55%
Maximum Outstanding
at Month-End $33,349 $27,806 $35,516

Table 12
SOURCES OF DEPOSIT GROWTH
(Average Balances - Dollars in Thousands)

1995 to Percentage
1996 of Total Components of Total Deposits
Change Change 1996 1995 1994

Noninterest Bearing
Deposits $ 9,992 8.8% 22.2% 24.4% 24.1%
NOW Accounts 11,393 10.1 13.3 13.9 14.3
Money Market Accounts 15,068 13.3 11.1 10.7 11.8
Savings 1,029 .9 11.2 13.0 16.7
Other Time 75,626 66.9 42.2 38.0 33.1
Total Deposits $113,108 100.0% 100.0% 100.0% 100.0%

Table 13
MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 OR OVER
(Dollars in Thousands)

December 31, 1996
Time Certificates of Deposit Percent

Three months or less $27,614 38.8%
Over three through six months 18,344 25.7
Over six through twelve months 19,042 26.7
Over twelve months 6,292 8.8
Total $71,292 100.0%

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 (i.e. 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, 1996, the Company has a $25.0 million credit
facility under which $10.0 million is currently available. 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. The Company also has the option to select fixed
rates for periods of one through five years. On July 1, 1996, the
Company borrowed $15.0 million in connection with the acquisition of
First Financial. The average interest rate during 1996 was 6.92%.

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.

At December 31, 1996, the Company had $3.1 million in long-term debt
outstanding to the Federal Home Loan Bank of Atlanta. The debt
consists of two loans. The interest rates are fixed and the weighted
average rate at December 31, 1996 was 6.10%. Required annual principal
reductions approximate $176,000, with the remaining balances due at
maturity in 2005 and 2006. The debt was used to match-fund selected
lending activities and is secured by first mortgage residential real
estate loans which are included in the Company's loan portfolio.

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, 1996, the Company had $134.8 million in
commitments to extend credit and $1.5 million in standby letters of
credit. Commitments to extend credit are agreements to lend to a
customer so long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many
of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. Standby letters of credit are conditional commitments
issued by 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 commitments arising from these
financial instruments continue to require funding at historical
levels, management does not anticipate that such funding will
adversely impact its ability to meet on-going obligations.

It is anticipated capital expenditures will approximate $4.0 to $5.0
million over the next twelve months. Management believes these
capital expenditures can be funded internally without impairing the
Company's ability to meet its ongoing obligations.

Shareholders' equity as of December 31, for each of the last three years
is presented below.

Shareholders' Equity
(Dollars in Thousands)

1996 1995 1994

Common Stock $ 29 $ 29 $ 29
Additional Paid in Capital 4,963 3,913 3,676
Retained Earnings 84,426 76,248 69,579
Subtotal 89,418 80,190 73,284
Unrealized Gains (Losses) 82 968 (884)
Total Shareholders'
Equity $89,500 $81,158 $72,400

The Company continues to maintain a strong capital position. The
ratio of shareholders' equity to total assets at year-end was 8.76%,
9.97%, and 9.75% in 1996, 1995, and 1994, respectively. The lower
capital ratio in 1996 reflects the acquisition of First Financial
which was accounted for as a purchase.

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 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 13.51% and a Tier 1 ratio of 12.27%,
compared to 19.26% and 18.02%, respectively, in 1995.

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, 1996, the
Company had a leverage ratio of 7.87% compared to 10.24% in 1995. See
Note 11 in the Notes to Consolidated Financial Statements for
additional information as to the Company's capital adequacy.

In 1996, the Board of Directors converted the Company's dividend
schedule from semi-annual to quarterly payments. Dividends declared
and paid totaled $1.11 per share in 1996. During the fourth quarter
of 1996, the quarterly dividend was raised from $.27 per share to $.30
per share. The Company declared dividends of $1.00 per share in 1995
and $.91 per share in 1994. The dividend payout ratio was 28.0%,
29.9%, and 29.3%, for 1996, 1995 and 1994, respectively. Dividends
declared per share in 1996 represented an 11.0% increase over 1995.

At December 31, 1996, the Company's common stock had a book value of
$30.98 per share compared to $28.44 in 1995 and $25.44 in 1994.
Beginning in 1994, book value has been impacted by the net unrealized
gains and losses on securities held as available-for-sale. At
December 31, 1996, the net unrealized gain was $82,000. At December
31, 1995, the Company had a net unrealized gain of $968,000 and thus
the net impact on equity for the year was a reduction in book value of
$886,000, or $.31 per share.

As of February 3, 1997, the common stock of CCBG began trading on the
NASDAQ National Market System under the symbol CCBG. On March 3,
1997, the high and low closing bid prices for CCBG common stock were
$62.00 and $61.25, respectively. Prior to February 3, 1997, and for
the last two fiscal years, there has been no established trading
market for CCBG common stock, and therefore, no bid or sale quotations
were generally available during such periods. Based on sales of stock
of which the Company has knowledge, the stock has traded in a range of
$30.00 to $42.00 per share for the two-year period ended December 31,
1996.

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, 1996, the Company had repurchased 263,580 shares under
the plan. No shares were repurchased during 1996.

The Company offers an Associate Incentive Plan under which certain
associates are eligible to earn shares of CCBG stock based upon
achieving established performance goals. In January 1997, 4,361
shares were issued based on 1996 performance at a total value of
$183,000.

The Company also offers stock purchase plans to its associates and
directors. In 1996, 14,369 shares were issued under these plans.

In December of 1996, the Board of Directors approved a Dividend
Reinvestment and Optional Stock Purchase Plan. It is anticipated
shareholders will be able to participate in this plan in the second
quarter of 1997.

Interest Rate Sensitivity

Table 14 presents the Company's consolidated interest rate sensitivity
position as of year-end 1996. 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.
The asset and liability values presented in Table 14 are as of
December 31, 1996, 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

In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("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
and did not have a material impact on the financial condition or
results of operations of the Company.

In June 1996, the FASB issued SFAS No. 125 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities."
Statement 125 provides new accounting and reporting standards for
sales, securitizations, and servicing of receivables and other
financial assets, for certain secured borrowing and collateral
transactions, and for extinguishment of liabilities. The adoption of
this standard on January 1, 1997, 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, 1996

Non-Rate
0-90 Days 91-180 Days 181-365 Days Over One Year Sensitive Total

Loans, Net of Unearned Interest $236,792 $ 63,574 $ 125,790 $246,040 $ - $ 672,196
Investment Securities (1) 35,572 20,407 29,563 121,647 - 207,189
Funds Sold 26,043 - - - - 26,043
Total Earning Assets 298,407 83,981 155,353 367,687 - 905,428

Cash, Property and Other Assets - - - - 124,150 124,150
Less: Allowance for Loan Losses - - - - (8,179) (8,179)
Total Assets $298,407 $ 83,981 $ 155,353 $367,687 $115,971 $1,021,399

Demand Deposits $ - $ - $ - $ - $196,486 $ 196,486
NOW Accounts(2) 114,507 - - - - 114,507
Money Market(2) 79,352 - - - - 79,352
Savings(2) - - 91,986 - - 91,986
Other Time 99,173 124,412 100,943 59,837 - 384,365
Total Deposits 293,032 124,412 192,929 59,837 196,486 866,696

Funds Purchased 28,697 - - - - 28,697
Other Short-Term Borrowings 2,260 5,000 - - - 7,260
Long-Term Debt - - - 18,072 - 18,072
Other Liabilities - - - - 11,174 11,174
Shareholders' Equity - - - - 89,500 89,500
Total Liabilities
& Shareholders' Equity $323,989 $129,412 $ 192,929 $ 77,909 $ 297,160 $1,021,399
Interest Rate Sensitivity Gap $(25,582) $(45,431) $ (37,576) $289,778 $(181,189) -
Cumulative Interest Rate
Sensitivity Gap $(25,582) $(71,013) $(108,589) $181,189 - -

Cumulative Gap as a Percentage
of Earning Assets (2.83%) (7.84%) (11.99%) 20.01% - -

(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

38
Report of Independent Certified Public Accountants

39
Consolidated Statements of Financial Condition

40
Consolidated Statements of Income

41
Consolidated Statements of Changes in Shareholders' Equity

42
Consolidated Statements of Cash Flows

43
Notes to Consolidated Financial Statements

Item 8. Financial Statements

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of
Capital City Bank Group, Inc.

We have audited the accompanying consolidated statements of financial
condition of Capital City Bank Group, Inc. (a Florida Corporation) and
subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Capital
City Bank Group, Inc. and subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
January 29, 1997

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands) As of December 31,
1996 1995

ASSETS
Cash and Due From Banks $ 62,863 $ 61,613
Federal Funds Sold 21,300 41,150
Interest Bearing Deposits in Other Banks 4,743 300
Investment Securities Available-for-Sale 207,189 230,747

Loans 674,675 447,779
Unearned Interest (2,479) (3,806)
Allowance for Loan Losses (8,179) (6,474)
Loans, Net 664,017 437,499

Premises and Equipment 34,006 26,240
Accrued Interest Receivable 6,877 7,339
Intangibles 8,398 1,129
Other Assets 12,006 7,642

Total Assets $1,021,399 $813,659

LIABILITIES
Deposits:
Noninterest Bearing Deposits $ 196,486 $168,566
Interest Bearing Deposits 670,210 531,013
Total Deposits 866,696 699,579

Federal Funds Purchased and Securities Sold
Under Repurchase Agreements 28,697 17,367
Other Short-Term Borrowings 7,260 2,400
Long-Term Debt 18,072 1,982
Other Liabilities 11,174 11,173
Total Liabilities 931,899 732,501

SHAREHOLDERS' EQUITY
Preferred Stock; $.01 par value, 3,000,000 shares
authorized; no shares outstanding - -
Common Stock, $.01 par value; 30,000,000 shares
authorized; 2,889,183 and 2,853,716 shares
outstanding 29 29
Additional Paid In Capital 4,963 3,913
Retained Earnings 84,426 76,248
Net Unrealized Gain on Available-
for-Sale Securities 82 968
Total Shareholders' Equity 89,500 81,158
Total Liabilities and
Shareholders' Equity $1,021,399 $813,659

The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.

CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
For the Years Ended December 31,
1996 1995 1994

INTEREST INCOME
Interest and Fees on Loans $51,857 $40,826 $35,490
Investment Securities:
U.S. Treasury 3,089 4,205 4,967
U.S. Government Agencies and Corporations 4,054 3,087 1,991
States and Political Subdivisions 3,477 3,444 3,461
Mortgage Backed Securities 1,173 413 -
Other Securities 332 261 313
Deposits in Other Banks 233 2 17
Federal Funds Sold 1,956 2,239 1,652
Total Interest Income 66,171 54,477 47,891

INTEREST EXPENSE
Deposits 23,080 19,382 13,990
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 1,229 1,053 650
Other Short-Term Borrowings 422 49 31
Long-Term Debt 688 4 54
Total Interest Expense 25,419 20,488 14,725

Net Interest Income 40,752 33,989 33,166
Provision for Loan Losses 1,463 293 1,246
Net Interest Income After Provision for
Loan Losses 39,289 33,696 31,920

NONINTEREST INCOME

Service Charges on Deposit Accounts 7,670 5,649 5,408
Data Processing 2,969 2,608 2,434
Income from Fiduciary Activities 1,164 942 680
Securities Transactions 50 8 (147)
Other 4,463 3,963 4,634
Total Noninterest Income 16,316 13,170 13,009

NONINTEREST EXPENSE
Salaries and Employee Benefits 21,036 17,959 17,087
Occupancy, Net 2,681 2,538 2,343
Furniture and Equipment 4,266 3,346 2,910
Other 11,272 9,623 10,371
Total Noninterest Expense 39,255 33,466 32,711

Income Before Income Taxes 16,350 13,400 12,218
Income Taxes 4,990 3,878 3,393
NET INCOME $ 11,360 $ 9,522 $ 8,825

NET INCOME PER SHARE $ 3.96 $ 3.34 $ 3.10

Average Common Shares Outstanding 2,866 2,853 2,847

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 On Securities,
Stock Capital Earnings Net of Taxes Total

Balance, January 1, 1994 $29 $3,666 $63,445 $ 848 $67,988
Net Income 8,825 8,825
Cash Dividends
($.91 per share) (2,590) (2,590)
Issuance of Common Stock 60 60
Retirement of Common Stock (50) (101) (151)
Net Change In Unrealized
Gains (Losses) (1,732) (1,732)

Balance, December 31, 1994 29 3,676 69,579 (884) 72,400
Net Income 9,522 9,522
Cash Dividends (2,853) (2,853)
($1.00 per share)
Issuance of Common Stock 237 237
Transfer of Held-to-Maturity
Securities to
Available-for-Sale 503 503
Net Change In Unrealized
Gains (Losses) 1,349 1,349

Balance, December 31, 1995 29 3,913 76,248 968 81,158
Net Income 11,360 11,360
Cash Dividends
($1.11 per share) (3,182) (3,182)
Issuance of Common Stock 1,050 1,050
Net Change In Unrealized
Gains (Losses) (886) (886)

Balance, December 31, 1996 $29 $4,963 $84,426 $ 82 $89,500

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,
1996 1995 1994

Net Income $ 11,360 $ 9,522 $ 8,825
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Provision for Loan Losses 1,463 293 1,246
Depreciation and Amortization 4,336 2,613 2,257
(Gain) on Sale of Properties (40) (83) (812)
(Gain) on Sale of Real Estate Loans (194) - -
Non-Cash Compensation 589 206 70
Deferred Income Taxes 1,043 893 101
Net Increase in
Interest Receivable (2,018) (1,793) (79)
Net (Increase) Decrease in
Other Assets 3,403 1,450 1,545
Net Increase in
Other Liabilities 4,198 3,817 604
Net Cash Provided by Operating Activities 24,140 16,918 13,757

Cash Flows Used in Investing Activities:
Proceeds from Payments/Maturities of
Investment Securities Held-to-Maturity - 48,529 77,324
Proceeds from Payments/Maturities/Sales of
Investment Securities Available-for-Sale 75,252 32,486 17,389
Purchase of Investment Securities
Held-to-Maturity - (27,000) (64,865)
Purchase of Investment Securities
Available-for-Sale (54,356) (83,621) (11,398)
Net Increase in Loans (36,558) (24,539) (22,669)
Purchase of Premises & Equipment (2,550) (4,482) (6,065)
Sale of Premises & Equipment 1,570 89 279
Net Cash Used to Fund Acquisition (16,167) - -
Net Cash Used in Investing Activities (32,809) (58,538) (10,005)

Cash Flows Provided by (Used in)
Financing Activities:
Net Increase (Decrease) in Deposits (37,988) 51,405 (14,571)
Net Increase (Decrease) in Federal
Funds Purchased 11,330 3,403 (9,300)
Net Increase (Decrease) in Other
Short-Term Borrowings 10,340 1,401 (202)
Addition to Long-Term Debt 17,180 1,982 -
Repayment of Long-Term Debt (1,090) - (1,900)
Dividends Paid (5,721) (2,590) (2,447)
Issuance (Repurchases) of Common Stock 461 15 (156)
Net Cash Provided by (Used in) Financing
Activities (5,488) 55,616 (28,576)

Net Increase (Decrease) in Cash
and Cash Equivalents (14,157) 13,996 (24,824)
Cash and Cash Equivalents at Beginning
of Year 103,063 89,067 113,891
Cash and Cash Equivalents at End
of Year $ 88,906 $103,063 $ 89,067

Supplemental Disclosures:

Interest on Deposits $ 25,959 $ 18,441 $ 14,381
Interest on Debt $ 2,339 $ 1,106 $ 735
Taxes Paid $ 3,722 $ 2,868 $ 3,614
Securities Transferred from
Held-to-Maturity To
Available-for-Sale $ - $122,630 $ -
Loans Transferred To Other Real Estate $ 2,192 $ 647 $ 453

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, 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

Investment securities available-for-sale are carried at fair value and
represent securities that are available to meet liquidity and/or other
needs of the Company. Gains and losses are recognized and reported
separately in the Consolidated Statements of Income upon realization
or when impairment of values is deemed to be other than temporary.
Gains or losses are recognized using the specific identification
method. Unrealized holding gains and losses for securities available-
for-sale are excluded from the Consolidated Statements of Income and
reported net of taxes as a separate component of shareholders' equity
until realized.

Loans

Loans are stated at the principal amount outstanding. Interest income
is generally accrued based on outstanding 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

The reserve is that amount considered adequate to absorb possible
losses in the portfolio based on management's evaluations of the size
and current risk characteristics of the loan portfolio. Such
evaluations consider the balance of impaired loans (which are defined
as all nonperforming loans except residential mortgages and groups of
small homogeneous loans), prior loan loss experience as well as the
impact of current economic conditions. Specific provision for loan
losses is made for impaired loans based on a comparison of the
recorded carrying value in the loan to either the present value of the
loan's expected cash flow, the loan's estimated market price or the
estimated fair value of the underlying collateral. Specific and
general provisions for loan losses are also made based on other
considerations.

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.

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 goodwill which was recognized
in connection with the acquisition of First Financial Bancorp, Inc.
and core deposit assets. All intangible assets are being amortized on
the straight-line method over various periods ranging from one to 25
years with the majority being written off over an average life of
approximately 15 years.

The pretax amortization of all intangible assets was approximately
$570,000 in 1996, $250,000 in 1995, and $341,000 in 1994. The Company
adopted SFAS No. 122, "Accounting for Mortgage Servicing Rights" on
January 1, 1996 and SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" on
January 1, 1997. The adoption of SFAS No. 122 and 125 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, an 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" was adopted on January 1, 1996. The
adoption did not have a significant impact on the financial condition
or results of operations of the Company.

Income Taxes

The Company files consolidated federal and state income tax returns.
In general, the parent company and its subsidiaries compute their tax
provisions as separate entities prior to recognition of any tax
expenses which may accrue from filing a consolidated return.

Deferred income tax assets and liabilities result from temporary
differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements that will result in
taxable or deductible amounts in future years.

Note 2

BUSINESS COMBINATION

On July 1, 1996, the Company completed its acquisition of First
Financial Bancorp, Inc.("First Financial"), parent company of First
Federal Bank. First Financial was acquired for $20 million in cash.
The Company borrowed $15 million to fund the acquisition. As of June
30, 1996, First Financial had approximately $244 million in assets,
$192 million in loans, $205 million in deposits, $15 million in equity
and operated five branch locations in North Florida.

The acquisition was accounted for under the purchase method of
accounting. Accordingly, the Company's consolidated results of
operations only reflect First Financial's operations for the period
from July 1, 1996.

The purchase price of First Financial has been allocated to the
underlying assets and liabilities based on the estimated fair values
as of the acquisition date. These amounts may be revised at a future
date when actual amounts become known, although such adjustments are
not expected to be significant. The intangibles created from this
acquisition totaled $7.5 million. These assets are being amortized
over periods not exceeding 15 years for financial reporting purposes.
A significant portion of the amortization of the intangible assets is
not deductible for tax purposes.

The following table sets forth the unaudited pro forma summary results
of operations for the years ended December 31, 1996 and 1995, assuming
the acquisition of First Financial, including the related debt
financing, had been consummated as of January 1, 1995. The pro forma
results are not necessarily indicative of the results that would have
been achieved had the acquisition occurred on January 1, 1995, or that
may occur in the future (dollars in thousands).

1996 1995

Net Interest Income $ 43,951 $ 39,457

Net Income $ 11,444 $ 9,858

Net Income Per Share $ 3.99 $ 3.46

Note 3

INVESTMENT SECURITIES

The amortized cost and related market value of investment securities at
December 31, were as follows:

(Dollars in Thousands)

1996
Amortized Unrealized Unrealized Market
Cost Gains Losses Value

U.S. Treasury $ 40,766 $ 75 $ 9 $40,832
U.S. Government Agencies
and Corporations 57,381 32 376 57,037
States and Political
Subdivisions 74,196 620 117 74,699
Mortgage Backed Securities 29,266 160 257 29,169
Other Securities 5,448 4 - 5,452
Total Investment Securities $207,057 $ 891 $759 $207,189

1995
Amortized Unrealized Unrealized Market
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

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 as follows:

(Dollars in Thousands)

Total Gross Gross
Year Proceeds Realized Gains Realized Losses

1996 $40,864 $80 $ 30
1995 $25,296 $11 $ 3
1994 $11,476 $13 $160

Total proceeds include principal reductions in mortgage backed
securities and proceeds from securities which were called of
$37,359,000, $22,546,000, and $4,033,000, in 1996, 1995, and 1994,
respectively.

As of December 31, 1996, the Company's investment securities had the
following maturity distribution:

(Dollars in Thousands)

Amortized Cost Market Value

Due in one year or less $ 31,169 $ 31,799
Due after one through five years 134,001 134,647
Due after five through ten years 5,757 5,614
Over ten years 6,064 5,960
Mortgage Backed Securities 29,266 29,169
Total Investment Securities $207,057 $207,189

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 $52,074,000 and $60,289,000 at
December 31, 1996, and 1995, respectively, 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)

1996 1995

Commercial, Financial and
Agricultural $ 57,023 $ 46,149
Real Estate - Construction 30,594 28,391
Real Estate - Mortgage 449,905 259,503
Consumer 137,153 113,736
Total Gross Loans $674,675 $447,779

Nonaccruing loans amounted to $2,704,000 and $2,996,000 at December
31, 1996 and 1995, respectively. Restructured loans amounted to
$262,000 and $1,686,000 at December 31, 1996 and 1995, respectively.
If such nonaccruing and restructured loans had been on a fully
accruing basis, interest income would have been $195,000 higher in
1996 and $320,000 higher in 1995.

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)

1996 1995 1994

Balance, Beginning of Year $6,474 $7,551 $7,594
Acquired Reserves 1,769 - -
Provision for Loan Losses 1,463 293 1,246
Recoveries on Loans
Previously Charged-Off 615 526 466
Loans Charged-Off (2,142) (1,896) (1,755)
Balance, End of Year $8,179 $6,474 $7,551

Selected information pertaining to impaired loans, at December 31, is as
follows:

(Dollars in Thousands)

1996 1995
Valuation Valuation
Balance Allowance Balance Allowance

With Related Credit Allowance $ 592 $ 165 $ 946 $ 334
Without Related Credit Allowance 2,374 - 1,962 -
Average Recorded Investment for
the Period 1,419 - 3,282 -

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 year ended
December 31, 1996, the Company recognized $26,000 in interest income
on impaired loans, of which $25,000 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) 1996 1995

Land $ 9,138 $ 5,705
Buildings 23,186 21,120
Fixtures and Equipment 23,245 18,409
Total 57,929 45,234
Accumulated Depreciation (21,563) (18,994)
Premises and Equipment, Net $34,006 $26,240

Note 7

DEPOSITS

Interest bearing deposits, by category, as of December 31, are as follows:

(Dollars in Thousands)

1996 1995

NOW Accounts $114,507 $122,517
Money Market Accounts 79,352 67,942
Savings Accounts 91,986 78,522
Other Time Deposits 384,365 262,032
Total $670,210 $531,013

Time deposits in denominations of $100,000 or more totaled $71,292,000
and $45,366,000 at December 31, 1996 and 1995, respectively.

The average balances maintained on deposit with the Federal Reserve
Bank for the years ended December 31, 1996 and 1995, were $25,249,000
and $29,811,000, respectively.

Interest expense on deposits for the three years ended December 31, is as
follows:

(Dollars in Thousands)

1996 1995 1994

NOW Accounts $ 1,877 $ 1,806 $ 1,809
Money Market Accounts 2,523 2,108 1,731
Savings Accounts 1,813 1,942 2,597
Other Time Deposits 16,867 13,526 7,853
Total $23,080 $19,382 $13,990

Note 8

DEBT

As of December 31, 1996, the Company has a $25.0 million credit
facility. The facility offers the Company an unsecured, revolving
line of credit for a period of three years and 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. The Company also has the
option to select fixed rates for periods of one through five years.
On July 1, 1996, the Company borrowed $15.0 million in connection with
the acquisition of First Financial. The average interest rate during
1996 was 6.92%. The existing loan agreement places certain
restrictions on the amount of capital which must be maintained by the
Company. On December 31, 1996, the Company's capital exceeded the
most restrictive covenants of the agreement.

At December 31, 1996, the Company had $3.1 million in long-term debt
outstanding to the Federal Home Loan Bank of Atlanta. The debt
consists of two loans. The interest rates are fixed and the weighted
average rate at December 31, 1996 was 6.10%. Required annual principal
reductions approximate $176,000, with the remaining balances due at
maturity in 2005 and 2006. 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, 1996 and 1995, the Company had other short-term
borrowings totaling $7.3 million and $2.4 million, respectively. At
December 31, 1996, these borrowings included $5.0 million in short-
term debt to the Federal Home Loan Bank with a fixed rate of 6.99%
secured by first mortgage residential real estate loans, and $2.3
million in Treasury, Tax and Loan notes with an average rate of 3.22%
and secured by investment securities. At December 31, 1995, there was
no short-term debt outstanding with the Federal Home Loan Bank and the
average rate on the Treasury, Tax and Loan notes was 4.23%.

Note 9

INCOME TAXES

The provision for income taxes reflected in the statement of income is
comprised of the following components:

(Dollars in Thousands)

1996 1995 1994

Current:
Federal $3,494 $2,646 $2,894
State 453 339 398
Deferred:
Federal 891 762 87
State 152 131 14
Total $4,990 $3,878 $3,393

The net deferred tax asset and the temporary differences comprising
that balance at December 31, 1996 and 1995, are as follows:

(Dollars in Thousands)
1996 1995

Deferred Tax Asset attributable to:
Allowance for Loan Losses $2,506 $2,438
Stock Incentive Plan 383 314
Writedown of Real Estate Held for Sale 196 25
Other 142 28
Total Deferred Tax Asset $3,227 $2,805

Deferred Tax Liability attributable to:
Premises and Equipment 705 851
Employee Benefits 693 593
Acquired Deposits 225 -
Securities Accretion 154 81
Deferred Loan Fees 382 109
Unrealized Gains on Investment Securities 50 549
Other 163 3
Total Deferred Tax Liability 2,372 2,186
Net Deferred Tax Asset $ 855 $ 619

Income taxes provided were less than the tax expense computed by applying
the statutory federal income tax rates to income. The primary differences
are as follows:

(Dollars in Thousands)
1996 1995 1994

Statutory Rate 35% 34% 34%
Computed Tax Expense $ 5,722 $4,556 $4,154
Increases (Decreases)
Resulting From:
Tax-Exempt Interest Income (1,100) (1,046) (1,079)
State Income Taxes,
Net of Federal Income
Tax Benefit 293 310 272
Other 75 58 46
Actual Tax Expense $ 4,990 $3,878 $3,393

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, amounts recognized in the Company's consolidated
statements of financial condition, and major assumptions used to determine
these amounts.

(Dollars in Thousands)

Components of Pension 1996 1995 1994

Expense:
Service Cost $1,241 $ 774 $ 764
Interest Cost 1,156 983 848
Actual Return on Plan Assets (2,781) (3,029) (318)
Net Amortization and Deferral 1,532 2,173 (406)
Total $1,148 $ 901 $ 888

Actuarial Present Value of
Benefit Obligations:

Accumulated Benefit
Obligations:
Vested $10,753 $ 8,353 $6,861
Nonvested 1,816 1,695 1,097
$12,569 $10,048 $7,958

Plan Assets at Fair Value
(primarily listed stocks
and bonds, U.S. Government
securities and interest
bearing deposits) $20,041 $15,946 $12,156
Projected Benefit Obligation (17,551) (14,565) (11,672)
Plan Assets in Excess of
Projected Benefit Obligation 2,490 1,381 484
Unrecognized Net Loss 852 1,636 2,187
Unrecognized Net Asset (1,176) (1,412) (1,648)
Prepaid Pension Cost $ 2,166 $ 1,605 $ 1,023

Major Assumptions:

Discount Rate 7.50% 7.50% 8.25%

Rate of Increase in
Compensation Levels 5.50% 5.50% 5.50%

Expected Long-Term Rate
of Return on Plan Assets 8.25% 7.50% 7.50%

In 1996, the Company adopted a Supplemental Employee Retirement Plan.
The Company recognized expense during 1996 of $145,000 and recorded a
minimum liability of $214,000 at December 31, 1996.

The Company has an Associate Incentive Plan under which shares of the
Company's stock are issued as incentive awards to selected
participants. Two hundred and fifty thousand shares of common stock
are reserved for issuance under this plan. The expense recorded
related to this plan was approximately $740,000, $424,000, and
$258,000 in 1996, 1995 and 1994, respectively. On January 23, 1997,
the Company issued 4,361 shares related to performance for the year
ended December 31, 1996.

The Company has an Associate Stock Purchase Plan under which employees
may elect to make a monthly contribution towards the purchase of
company stock on a semi-annual basis. One hundred fifty thousand
shares of common stock are reserved for issuance under the Stock
Purchase Plan. The Company issued 14,369 shares under the plan in
1996.

In 1996, the Company adopted a Director Stock Purchase Plan. Fifty
thousand shares have been reserved for issuance. On January 15, 1997,
the Company issued 4,390 shares under this plan.

Note 11

CAPITAL

The Company is subject to various regulatory capital requirements
which involve quantitative measures of the Company's assets,
liabilities and certain off-balance sheet items. The Company's
capital amounts and classification are subject to qualitative
judgments by the regulators about components, risk weightings, and
other factors. Quantitative measures established by regulation to
ensure capital adequacy require that the Company maintain amounts and
ratios (set forth in the table below) of total and Tier I capital to
risk-weighed assets, and of Tier I capital to average assets. As of
December 31, 1996, the Company meets all capital adequacy requirements
to which it is subject.

A summary of actual, required, and capital ratios necessary to be considered
well-capitalized for Capital City Bank Group, Inc. ("CCBG, Inc.")
consolidated and its lead banking subsidiary, Capital City Bank ("CCB")
as of December 31, 1996 is shown below:

(Dollars in Thousands)

To Be Well
Required Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 1996:

Tier I Capital:
CCBG, Inc. $81,102 12.27% $26,439 4.00% $39,658 6.00%
CCB 77,393 13.38 23,129 4.00 34,694 6.00

Total Capital:
CCBG, Inc. 89,281 13.51 52,878 8.00 66,097 10.00
CCB 84,382 14.59 46,258 8.00 57,823 10.00

Tier I Leverage:
CCBG, Inc. 7.87 3.00 5.00
CCB 8.74 3.00 5.00

Substantially all the Company's retained earnings are undistributed
earnings of its banking subsidiaries, which are restricted by various
regulations administered by Federal and state bank regulatory
authorities. Retained earnings of bank subsidiaries available for
payment of cash dividends to Capital City Bank Group, Inc. under these
regulations were approximately $7.7 million at December 31, 1996.

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 1997, the bank subsidiaries may declare dividends
without regulatory approval of $7.7 million plus an additional amount
equal to the net profits of the Company's subsidiary banks for 1997 up
to the date of any such dividend declaration.

Note 13

RELATED PARTY INFORMATION

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 $347,000,
$225,000, and $242,000 during 1996, 1995, and 1994, 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 $65,000, to be adjusted for inflation in future years.

At December 31, 1996 and 1995, certain officers and directors were
indebted to the Company's bank subsidiaries in the aggregate amount of
$13,469,000 and $11,669,000, respectively. During 1996, $17,337,000 in
new loans were made and repayments totaled $15,537,000. These loans
were made on similar terms as loans to other individuals of comparable
creditworthiness.

Note 14

SUPPLEMENTARY INFORMATION

Components of noninterest income in excess of 1% of total interest income
and noninterest expense in excess of 1% of total interest income and
noninterest income, which are not disclosed separately elsewhere, are
presented below for each of the respective years.

(Dollars in Thousands) 1996 1995 1994

Noninterest Income:
Merchant Fee Income $ 976 $1,227 $ 932
Gains on the Sale of Real Estate 109* 94* 827

Noninterest Expense:
Employee Insurance 1,163 1,068 932
Payroll Taxes 1,112 963 927
Maintenance and Repairs 2,227 1,955 1,760
Professional Fees 1,172 565* 667
Advertising 620* 494* 706
Printing & Supplies 1,547 1,634 1,129
Telephone 813* 662* 700
Insurance (including FDIC Premium) 641* 1,042 1,285
Commission/Service Fees 819* 878 890*
*Less than 1% of the appropriate threshold.

Note 15

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,
1996, the amounts associated with the Company's off-balance-sheet
obligations were as follows:

(Dollars in Thousands) Amount

Commitments to Extend Credit(1) $134,765
Standby Letters of Credit $ 1,493

(1) Commitments include unfunded loans, revolving lines of credit
(including credit card lines) and other unused commitments.

Commitments to extend credit are agreements to lend to a customer so
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements.

Standby letters of credit are conditional commitments issued by the
company to guarantee the performance of a customer to a third party.
The credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities. In general,
management does not anticipate any material losses as a result of
participating in these types of transactions. However, any potential
losses arising from such transactions are reserved for in the same
manner as management reserves for its other credit facilities.

For both on- and off-balance-sheet financial instruments, the Company
requires collateral to support such instruments when it is deemed
necessary. The Company evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained upon extension
of credit is based on management's credit evaluation of the
counterparty. Collateral held varies, but may include deposits held in
financial institutions; U.S. Treasury securities; other marketable
securities; real estate; accounts receivable; property, plant and
equipment; and inventory.

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 86.7% of the Company's total loan volume. At
December 31, 1996 approximately 71.5% of the Company's loan portfolio
consisted of real estate related loans in north Florida.

Note 16

FAIR VALUE OF FINANCIAL INSTRUMENTS

Many of the Company's assets and liabilities are short-term financial
instruments whose carrying values approximate fair value. These items
include Cash and Due From Banks, Interest Bearing Deposits with Other
Banks, Federal Funds Sold, Federal Funds Purchased 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 as the current rate approximates the market
rate.

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,
1996 1995
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value

Financial Assets:
Loans, Net of Allowance
for Loan Losses $664,017 $669,683 $437,499 $441,446

Financial Liabilities:
Deposits 866,696 883,643 699,579 700,868

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 17

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)
1996 1995

ASSETS
Cash and Due from Group Banks $ 2,622 $ 4,378
Investment in Group Banks 102,362 80,143
Other Assets 704 227
Total Assets $105,688 $84,748

LIABILITIES

Dividends Payable $ - $ 2,539
Long-Term Debt 15,000 -
Other Liabilities 1,188 1,051
Total Liabilities 16,188 3,590

SHAREHOLDERS' EQUITY

Preferred Stock; $.01 par value, 3,000,000 shares
authorized; no shares outstanding - -
Common Stock, $.01 par value; 30,000,000
shares authorized; 2,889,183 and 2,853,716
shares outstanding 29 29
Additional Paid in Capital 4,963 3,913
Retained Earnings 84,426 76,248

Net Unrealized Gain on Group Banks'
Available-for-Sale Securities 82 968
Total Shareholders' Equity 89,500 81,158
Total Liabilities and Shareholders' Equity $105,688 $84,748

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) 1996 1995 1994
OPERATING INCOME
Income Received from Group Banks:

Dividends $ 9,600 $3,884 $4,615
Group Overhead Fees 3,106 2,702 2,311
Total Operating Income 12,706 6,586 6,926

OPERATING EXPENSE
Salaries and Employee Benefits 2,353 2,064 1,565
Legal Fees 85 48 74
Professional Fees 332 243 157
Advertising 430 391 594
Travel and Entertainment 113 52 72
Amortization of Goodwill 29 52 52
Interest on Debt 523 - 54
Dues and Memberships 56 46 49
Other 273 204 361
Total Operating Expense 4,194 3,100 2,978

Income Before Income Taxes and Equity
in Undistributed earnings of Group Banks 8,512 3,486 3,948
Income Tax Benefit (380) (135) (233)
Income Before Equity in Undistributed
Earnings of Group Banks 8,892 3,621 4,181
Equity in Undistributed Earnings
of Group Banks 2,468 5,901 4,644
Net Income $11,360 $9,522 $8,825

The cash flows for the parent company for the three years ended December
31, were as follows:

Parent Company Statements of Cash Flows
1996 1995 1994

Net Income $11,360 $9,522 $8,825
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Equity in undistributed
earnings of Group Banks (2,468) (5,901) (4,644)
Non-Cash Compensation 589 206 70
Amortization of Goodwill 29 52 52
(Increase) Decrease in Other Assets (477) 140 3
Net Increase in Other Liabilities 137 114 228
Net Cash Provided by Operating Activities 9,170 4,133 4,534

Cash Flows Used in Financing Activities:
Addition to Long-Term Debt 15,000 - -
Acquisition of First Financial (20,666) - -
Repayment of Long-Term Debt - - (1,900)
Payment of Dividends (5,721) (2,590) (2,447)
Issuance (Repurchase) of Common Stock, Net 461 15 (156)
Net Cash Used in Financing Activities (10,926) (2,575) (4,503)
Net Increase in Cash (1,756) 1,558 31
Cash at Beginning of Period 4,378 2,820 2,789
Cash at End of Period $ 2,622 $4,378 $2,820

Note 18

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.

Note 19

RECLASSIFICATION

Pursuant to current state laws, treasury shares are treated as
authorized, but unissued. Accordingly, the Company canceled all
existing treasury shares and recorded the cancellation as charges to
additional paid-in capital and retained earnings. All prior period
statements presented herein have been reclassified to reflect the
cancellation of treasury shares and to conform with current period
presentation.

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: 1996 $ 9,708 $ 1,089 $ 707 $ 564
Net Income 1995 7,743 909 576 557
1994 7,337 1,000 503 419

At December 31:
Loans,
Net of
Unearned 1996 $582,561 $44,821 $23,638 $21,176
Interest 1995 362,462 42,313 21,384 17,714
1994 342,606 42,343 20,021 15,834

Assets 1996 $865,217 $84,716 $40,349 $34,025
1995 699,697 78,020 36,898 32,247
1994 611,923 71,004 33,457 28,953

Noninterest
Bearing
Deposits 1996 $176,908 $12,119 $ 8,807 $ 5,572
1995 154,241 12,321 5,163 5,362
1994 152,450 11,104 5,903 4,897

Interest
Bearing 1996 $555,233 $63,637 $26,880 $24,458
Deposits 1995 424,228 56,636 27,176 22,974
1994 383,991 51,983 23,749 20,740

Shareholders'
Equity 1996 $ 85,745 $ 8,213 $ 4,146 $ 3,573
1995 63,756 8,156 3,971 3,547
1994 57,607 7,497 3,537 3,036

*Information for Capital City Bank represents combined group bank amounts
for 1994 (see Note 18).

Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures.

Not applicable.

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 4, 1997
to be filed on or before April 4, 1997.

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 4, 1997, to be filed on or before April 4,
1997.

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 4, 1997, to be filed on or before April 4, 1997.

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 4, 1997
to be filed on or before April 4, 1997.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K

14(a)(1) List of Financial Statements.
Report of Independent Certified Public Accountants.
Consolidated Statements of Financial Condition for the
years ended December 31, 1996 and 1995.
Consolidated Statements of Income for each of the three
years ended December 31, 1996.
Consolidated Statements of Changes in Shareholders' Equity
for each of the three years ended December 31, 1996.
Consolidated Statements of Cash Flows for each of the
three years ended December 31, 1996.
Notes to Consolidated Financial Statements.

14(a)(2) Financial Statement Schedules

23 Consent of Arthur Andersen LLP

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.

14(a)(3) 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., is incorporated herein by reference to the
Registrant's Form 10-K dated March 29, 1996.

3(a) Articles of Incorporation, as amended, of Capital City Bank
Group, Inc., are incorporated herein by reference to Exhibit B of the
Registrant's 1996 Proxy Statement, dated April 12, 1996.

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 10-K/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, is incorporated herein by reference to the Registrant's Form
10-K/A dated April 9, 1996.

10(c) 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(d) Capital City Bank Group, Inc. 1996 Associate Incentive Plan is
incorporated herein by reference to Exhibit A of the Registrant's 1996
Proxy Statement, dated April 12, 1996.

10(e) Capital City Bank Group, Inc. 1996 Director Stock Purchase
Plan, as amended, is incorporated by reference to the Registrant's
Form S-8 filed on December 23, 1996 (Registration No. 333-18557).

10(f) Capital City Bank Group, Inc. 1996 Dividend Reinvestment and
Optional Stock Purchase Plan is incorporated herein by reference to
the Registrant's Form S-3 filed on January 30, 1997 (Registration No.
333-20683).

21 For a listing of Capital City Bank Group's subsidiaries See Item
I.

22(a) Report of Independent Certified Public Accountants

27 Financial Data Schedule

14(b) REPORTS ON FORM 8-K

Capital City Bank Group, Inc. ("CCBG") filed a Form 8-K/A on November
27, 1996 to amend Form 8-K/A filed on September 13, 1996, which report
set forth certain financial information relating to the Company's
First Financial acquisition.

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 28, 1997, on its behalf by the undersigned, thereunto
duly authorized.

CAPITAL CITY BANK GROUP, INC.

/s/ William G. Smith, Jr.
President and Chief Executive Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on March 8, 1997 by the following persons
in the capacities indicated.

/s/ WILLIAM G. SMITH, JR.
William G. Smith, Jr.
President and Chief Executive Officer
(Principal Executive Officer)

/s/ J. KIMBROUGH DAVIS
J. Kimbrough Davis
Executive 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.