CAPITAL CITY BANK GROUP INC

Signatures

INTRODUCTORY NOTE

Special Cautionary Notice Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform

Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations,

estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of

which are beyond our control.

The words “may,” “could,” “should,” “would,” “believe,”

“anticipate,” “contemplate,” “estimate,” “expect,”

“intend,” “plan,” “point to,” “project,” “target,” “vision,” “goal,” “continue,” “further,”

and similar expressions are intended to identify

forward-looking statements.

All forward-looking statements, by their nature, are subject to risks and uncertainties.

Our actual future results may differ materially from

those set forth in our forward-looking statements.

Our

ability

to

achieve

our

financial

objectives

could

be

adversely

affected

by

the

factors

discussed

in

detail

in

Part

II,

Item

1A.

“Risk

Factors” in this Quarterly Report on Form 10-Q and in Part I, Item 1A. “Risk Factors” in our Annual Report on

Form 10-K for the year ended

December 31,

(the “2024

Form 10-K”),

as updated

in our

subsequent

quarterly reports

filed on

Form 10-Q,

as well

as,

among other

factors:

●

The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal

Reserve Board;

●

Inflation, interest rate, market and monetary fluctuations;

●

Local, regional, national, and international economic conditions and the impact they may have on us and our clients and our

assessment of that impact;

●

The costs and effects of legal and regulatory developments, the outcomes of legal proceedings or regulatory or other

governmental inquiries, the results of regulatory examinations or reviews and the ability to obtain required regulatory

approvals;

●

The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and

insurance) and their application with which we and our subsidiaries must comply;

●

The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as other

accounting standard setters;

●

The accuracy of our financial statement estimates and assumptions;

●

Changes in the financial performance and/or condition of our borrowers;

●

Changes in the mix of loan geographies, sectors and types or the level of non-performing assets and charge-offs;

●

Changes in estimates of future credit loss reserve requirements based upon the periodic review thereof under relevant

regulatory and accounting requirements;

●

Changes in our liquidity position;

●

The timely development and acceptance of new products and services and perceived overall value of these products and

services by users;

●

Changes in consumer spending, borrowing, and saving habits;

●

Greater than expected costs or difficulties related to the integration of new products and lines of business;

●

Technological changes;

●

The cost and effects of cyber incidents or other failures, interruptions, or security breaches of our systems or those of our

customers or third-party providers;

●

Fraud or misconduct by internal or external parties which we may not be able to prevent, detect or mitigate;

●

Acquisitions and integration of acquired businesses;

●

Impairment of our goodwill or other intangible assets;

●

Changes in the reliability of our vendors, internal control systems, or information systems;

●

Our ability to increase market share and control expenses;

●

Our ability to attract and retain qualified employees;

●

Changes in our organization, compensation, and benefit plans;

●

The soundness of other financial institutions;

●

Volatility

and disruption in national and international financial and commodity markets;

●

Changes in the competitive environment in our markets and among banking organizations and other financial service

providers;

●

Government intervention in the U.S. financial system;

●

A deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid

exceeding the debt ceiling, and uncertainties surrounding the federal budget and economic policy;

●

The effects of natural disasters (including hurricanes), widespread health emergencies (including pandemics), military conflict,

terrorism, civil unrest, climate change or other geopolitical events;

●

Our ability to declare and pay dividends;

●

Structural changes in the markets for origination, sale and servicing of residential mortgages;

●

Any inability to implement and maintain effective internal control over financial reporting and/or disclosure control;

●

Potential claims, damages, penalties, fines, costs and reputational damage resulting from pending or future litigation,

regulatory proceedings and enforcement actions;

●

Negative publicity and the impact on our reputation;

●

The limited trading activity and concentration of ownership of our common stock; and

●

Other factors and risks described under “Risk Factors” herein and in any of the Company’s subsequent

reports filed with the

SEC and available on its website at www.sec.gov.

However, other factors besides those listed in

or discussed in this Form 10-Q also could adversely affect our results,

and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties.

Any forward-looking

statements made by us or on our behalf speak only as of the date they are made.

We do not undertake to update any forward-looking

statement, except as required by applicable law.

PART

I.

FINANCIAL INFORMATION

GROUP,

INC.

OF FINANCIAL CONDITION

December 31,

(Dollars in Thousands, Except Par Value)

ASSETS

Cash and Due From Banks

$

78,485

$

70,543

Federal Funds Sold and Interest Bearing Deposits

394,917

321,311

Total Cash and Cash Equivalents

473,402

391,854

Investment Securities, Available

for Sale, at fair value (amortized cost of $

551,404

and $

429,033

)

533,457

403,345

Investment Securities, Held to Maturity (fair value of $

448,911

and $

544,460

)

462,599

567,155

3,242

2,399

Total Investment

Securities

999,298

972,899

Loans Held For Sale, at fair value

19,181

28,672

(29,862)

(29,251)

Loans Held for Investment, Net

2,601,628

2,622,299

Premises and Equipment, Net

79,906

81,952

Goodwill and Other Intangibles

92,693

92,773

Other Real Estate Owned

125,513

134,116

Total Assets

$

$

LIABILITIES

Deposits:

Noninterest Bearing Deposits

$

1,332,080

$

1,306,254

Interest Bearing Deposits

2,372,773

2,365,723

Total Deposits

3,704,853

3,671,977

34,541

28,304

42,582

52,887

Other Long-Term

Other Liabilities

82,674

75,653

Total Liabilities

3,865,330

3,829,615

SHAREOWNERS’ EQUITY

Preferred Stock, $

0.01

par value;

3,000,000

shares authorized;

no

shares issued and outstanding

Common Stock, $

0.01

par value;

90,000,000

shares authorized;

and

16,974,513

shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

Additional Paid-In Capital

39,527

37,684

Retained Earnings

487,665

463,949

Accumulated Other Comprehensive Loss, net of tax

(940)

(6,486)

Total Shareowners’

Equity

526,423

495,317

Total Liabilities and Shareowners’

Equity

$

$

GROUP,

INC.

OF INCOME

(Dollars in Thousands, Except Per Share

Data)

INTEREST INCOME

Loans, including Fees

$

40,872

$

41,138

$

81,350

$

81,821

Investment Securities:

Taxable

6,666

3,998

12,469

8,236

Tax Exempt

Funds Sold and Interest Bearing Deposits

3,909

3,624

7,405

5,517

Total Interest Income

51,459

48,766

101,241

95,586

INTEREST EXPENSE

7,405

8,579

14,788

16,173

1,090

1,258

Other Long-Term

Total Interest Expense

8,275

9,497

16,510

17,962

NET INTEREST INCOME

43,184

39,269

84,731

77,624

1,204

1,388

2,124

Net Interest Income After Provision For Credit Losses

42,564

38,065

83,343

75,500

NONINTEREST INCOME

5,320

5,377

10,381

10,627

3,774

3,766

7,288

7,386

Wealth Management

Fees

5,206

4,439

10,969

9,121

4,190

4,381

8,010

7,259

Other

1,524

1,643

3,273

3,310

Total Noninterest

Income

20,014

19,606

39,921

37,703

NONINTEREST EXPENSE

Compensation

26,490

24,406

52,738

48,813

Occupancy, Net

7,071

6,997

13,864

13,991

Other

8,977

9,038

14,637

17,808

Total Noninterest

Expense

42,538

40,441

81,239

80,612

INCOME BEFORE INCOME TAXES

20,040

17,230

42,025

32,591

4,996

3,189

10,123

6,725

NET INCOME

15,044

14,041

31,902

25,866

Loss Attributable to Noncontrolling Interests

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

$

15,044

$

14,150

$

31,902

$

26,707

BASIC NET INCOME PER SHARE

$

0.88

$

0.84

$

1.87

$

1.58

DILUTED NET INCOME PER SHARE

$

0.88

$

0.83

$

1.87

$

1.57

Average Common

Basic Shares Outstanding

17,056

16,931

17,042

16,941

Average Common

Diluted Shares Outstanding

17,088

16,960

17,067

16,964

GROUP,

INC.

OF COMPREHENSIVE INCOME (LOSS)

NET INCOME ATTRIBUTABLE

TO COMMON SHAREOWNERS

$

15,044

$

14,150

$

31,902

$

26,707

Other comprehensive income, before

tax:

Investment Securities:

Change in net unrealized loss on securities available for sale

2,737

7,744

(406)

Amortization of unrealized losses on securities transferred from

available for sale to held to maturity

1,736

Derivative:

Change in net unrealized gain on effective cash flow

derivative

(485)

(50)

(1,189)

Other comprehensive income, before

tax

2,596

1,564

7,397

1,717

Deferred tax expense related to other comprehensive income

1,851

Other comprehensive income, net of tax

1,947

1,404

5,546

1,470

TOTAL COMPREHENSIVE

INCOME

$

16,991

$

15,554

$

37,448

$

28,177

GROUP,

INC.

OF CHANGES IN SHAREOWNERS’ EQUITY

Accumulated

Other

Additional

Comprehensiv

e

Shares

Common

Paid-In

Retained

(Loss) Income,

(Dollars In Thousands, Except Share Data)

Outstanding

Stock

Capital

Earnings

Net of Taxes

Total

Balance, April 1, 2025

17,054,787

$

$

38,576

$

476,715

$

(2,887)

$

512,575

15,044

15,044

1,947

1,947

0.2400

(4,094)

(4,094)

11,608

Balance, June 30, 2025

$

$

39,527

$

487,665

$

(940)

$

526,423

Balance, April 1, 2024

16,928,507

$

$

34,861

$

435,364

$

(22,080)

$

448,314

14,150

14,150

1,404

1,404

0.2100

(3,555)

(3,555)

13,046

Balance, June 30, 2024

16,941,553

$

$

35,547

$

445,959

$

$

460,999

Balance, January 1, 2025

16,974,513

$

$

37,684

$

463,949

$

(6,486)

$

495,317

31,902

31,902

5,546

5,546

0.4800

(8,186)

(8,186)

91,882

Balance, June 30, 2025

$

$

39,527

$

487,665

$

(940)

$

526,423

Balance, January 1, 2024

16,950,222

$

$

36,326

$

426,275

$

(22,146)

$

440,625

26,707

26,707

Reclassification to Temporary Equity

(1)

1,470

1,470

0.4200

(7,110)

(7,110)

Repurchase of Common Stock

(82,540)

(2,330)

(2,330)

73,871

(1)

Balance, June 30, 2024

16,941,553

$

$

35,547

$

445,959

$

$

460,999

(1)

Adjustments to redemption value for non-controlling

interest in Capital City Home Loans, LLC ("CCHL")

GROUP,

INC.

OF CASH FLOWS

CASH FLOWS FROM OPERATING

ACTIVITIES

$

31,902

$

26,707

Adjustments to Reconcile Net Income to

Cash Provided by Operating Activities:

1,388

2,124

Depreciation

3,676

4,050

Amortization of Premiums, Discounts and Fees, net

2,272

1,842

Amortization of Intangible Asset

Originations of Loans Held-for-Sale

(218,167)

(241,631)

Proceeds From Sales of Loans Held-for-Sale

232,204

249,378

(8,010)

(7,259)

Net Additions for Capitalized Mortgage Servicing Rights

Stock Compensation

Net Tax Benefit from

Stock-Based Compensation

(154)

Deferred Income Taxes (Benefit)

1,391

(1,346)

Net Change in Operating Leases

(33)

Net Gain on Sales and Write-Downs of Other Real Estate Owned

(4,514)

Net Decrease in Other Assets

5,124

1,425

Net Increase in Other Liabilities

6,363

3,170

Net Cash Provided By Operating Activities

54,491

39,584

CASH FLOWS FROM INVESTING ACTIVITIES

Securities Held to Maturity:

(47,841)

(3,944)

Proceeds from Payments, Maturities, and Calls

152,124

45,849

Sale:

(155,436)

(5,661)

Proceeds from Payments, Maturities, and Calls

32,471

32,169

Equity Securities:

(60)

Net Decrease (Increase) in Equity Securities

(10)

Purchases of Loans Held for Investment

(304)

(302)

Proceeds from Sales of Loans

25,696

19,176

Net (Increase) Decrease in Loans Held for Investment

(4,047)

24,288

Proceeds From Sales of Other Real Estate Owned

7,341

Purchases of Premises and Equipment

(4,222)

(4,198)

Net Cash Provided by Investing Activities

5,816

107,367

CASH FLOWS FROM FINANCING ACTIVITIES

Net Increase (Decrease) in Deposits

32,876

(93,258)

Net Increase (Decrease) in Short-Term

6,237

(9,571)

Redemption of Subordinated Notes

(10,305)

Net Increase (Decrease) in Other Long-Term

Dividends Paid

(8,186)

(7,110)

Payments to Repurchase Common Stock

(2,330)

Proceeds from Issuance of Common Stock Under Purchase Plans

Net Cash Provided By (Used In) Financing Activities

21,241

(111,039)

NET INCREASE IN CASH AND CASH EQUIVALENTS

81,548

35,912

Cash and Cash Equivalents at Beginning of Period

391,854

312,067

Cash and Cash Equivalents at End of Period

$

473,402

347,979

Supplemental Cash Flow Disclosures:

Interest Paid

$

16,543

$

17,153

Income Taxes Paid

$

3,220

$

3,005

Supplemental Noncash Items:

Loans and Premises Transferred to Other Real Estate Owned

$

2,592

$

Loans Transferred from Held for Investment

to Held for Sale, net

$

22,232

$

15,475

GROUP,

INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 –

BUSINESS AND BASIS OF PRESENTATION

Nature of Operations

.

Capital City Bank Group, Inc. (“CCBG” or the “Company”) provides a full range of

banking and banking-

related services to individual and corporate clients through its wholly owned

subsidiary, Capital City Bank (“CCB” or the

“Bank”),

with banking offices located in Florida, Georgia,

and Alabama.

The Company is subject to competition from other financial

institutions, is subject to regulation by certain government agencies and undergoes

periodic examinations by those regulatory

authorities.

Basis of Presentation

.

The consolidated financial statements in this Quarterly Report on Form

10-Q include the accounts of CCBG

and CCB.

All material inter-company transactions and accounts have

been eliminated.

Certain previously reported amounts have

been reclassified to conform to the current year’s presentation.

The accompanying unaudited consolidated financial statements have

been prepared in accordance with generally accepted accounting

principles for interim financial information and with the instructions to Form

10-Q and Article 10 of Regulation S-X.

Accordingly,

they do not include all of the information and notes required by generally accepted

accounting principles for complete financial

statements.

In the opinion of management, all adjustments (consisting of normal

recurring accruals) considered necessary for a fair

presentation have been included.

The Consolidated Statement of Financial Condition at December

31, 2024 has been derived from the audited consolidated financial

statements at that date, but does not include all of the information and notes

required by generally accepted accounting principles for

complete financial statements.

For further information, refer to the consolidated financial statements and notes

thereto included in the

Company’s 2024 Form

10-K.

Accounting Standards Updates

Proposed Accounting Standards

,

ASU No. 2023-06, “Disclosure Improvements:

Codification Amendments in Response to the SEC’s

Disclosure Update and Simplification Initiative.”

Accounting Standards Update

(“ASU”) 2023-06 is intended to clarify or improve

disclosure and presentation requirements of a variety of topics, which will allow users to

more easily compare entities subject to the

SEC’s existing disclosures with those

entities that were not previously subject to the requirements and align the requirements

in the

FASB accounting

standard codification with the SEC’s

regulations. ASU 2023-06 is to be applied prospectively,

and early adoption is

prohibited. For reporting entities subject to the SEC’s

existing disclosure requirements, the effective

dates of ASU 2023-06 will be the

date on which the SEC’s removal of

that related disclosure requirement from Regulation S-X or Regulation

S-K becomes effective. If

by June 30, 2027, the SEC has not removed the applicable requirement from

Regulation S-X or Regulation S-K, the pending content

of the related amendment will not become effective for

any entities. The Company is currently evaluating the provisions of the

amendments and the impact on its future consolidated statements.

ASU No. 2023-09, “Income Taxes

(Topic

740): Improvements to Income Tax

Disclosures.”

ASU 2023-09 is intended to enhance

transparency and decision usefulness of income tax disclosures. The ASU addresses

investor requests for more transparency about

income tax information through improvements to income tax disclosures,

primarily related to the rate reconciliation and income taxes

paid information. Retrospective application in all prior periods is permitted.

ASU 2023-09 is effective for the Company as of January

1, 2025. The Company is currently evaluating the impact of the incremental

income taxes information that will be required to be

disclosed within its Annual Report on Form 10-K for the year ended December

31, 2025 and subsequent annual reports.

ASU No. 2023-03, “Income Statement — Reporting Comprehensive

Income — Expense Disaggregation

Disclosures (Subtopic 220-

40): Disaggregation of Income Statement

Expenses.”

ASU 2024-03 introduces new requirements to disclose additional information

about certain types of expenses, including employee compensation, depreciation,

intangible asset amortization, and selling expenses.

ASU 2024-03 is effective for the Company as of January 1, 2026. The

Company is currently evaluating the impact of the incremental

disclosures that will be required under the standard.

NOTE 2 –

INVESTMENT SECURITIES

Investment Portfolio Composition

. The following table summarizes the amortized cost and related fair value of investment

securities available-for-sale (“AFS”) and securities held-to-maturity (“HTM”)

and the corresponding amounts of gross

unrealized gains and losses.

Sale

Amortized

Allowance for

Fair

Cost

Gains

Losses

Credit Losses

Value

$

221,568

$

1,116

$

$

$

222,321

166,665

3,666

163,068

40,551

2,708

(1)

37,873

(1)

62,904

9,277

53,628

51,619

3,080

(69)

48,470

(2)

8,097

8,097

Total

$

551,404

$

1,217

$

19,094

$

(70)

$

533,457

$

106,710

$

$

$

$

105,801

148,666

5,578

143,127

43,212

3,827

(3)

39,382

(1)

66,379

10,902

55,477

55,970

4,444

(64)

51,462

(2)

8,096

8,096

Total

$

429,033

$

$

25,685

$

(67)

$

403,345

Amortized

Fair

Cost

Gains

Losses

Value

$

235,499

$

$

2,748

$

232,751

(1)

227,100

11,176

216,160

Total

$

462,599

$

$

13,924

$

448,911

$

368,005

$

$

6,476

$

361,529

(1)

199,150

16,235

182,931

Total

$

567,155

$

$

22,711

$

544,460

(1)

Comprised of residential mortgage-backed

securities.

(2)

Includes Federal Home Loan Bank and Federal Reserve Bank stock, recorded

at cost of $

3.0

5.1

million,

respectively,

at June 30, 2025 and at December 31, 2024.

At June 30, 2025 and December 31, 2024, the investment portfolio had $

3.2

2.4

million, respectively, in

equity

securities. These securities do not have a readily determinable fair value

and were not credit impaired.

Securities with an amortized cost of $

385.5

489.5

million at June 30, 2025 and December 31, 2024, respectively,

were

pledged to secure public deposits and for other purposes.

The Bank, as a member of the Federal Home Loan Bank of Atlanta (“FHLB”), is required

to own capital stock in the FHLB based

generally upon the balances of residential and commercial real estate loans, and

FHLB advances. The Bank’s investment

in FHLB

stock, which is included in other securities is pledged to secure FHLB advances.

No ready market exists for this stock, and it has no

quoted fair value; however, redemption

of this stock has historically been at par value.

As a member of the Federal Reserve Bank of

Atlanta, the Bank is required to maintain stock in the Federal Reserve Bank of Atlanta

based on a specified ratio relative to the Bank’s

capital.

Federal Reserve Bank stock is carried at cost.

Investment Sales.

There were

no

sales of investment securities for the three and six months ended June 30, 2025 and

Maturity Distribution

.

At June 30, 2025, the Company’s investment

securities had the following maturity distribution based on

contractual maturity.

Expected maturities may differ from contractual maturities because borrowers

may have the right to call or

prepay obligations.

Mortgage-backed securities, certain amortizing U.S. government agency

securities and other securities are shown

separately because they are not due at a certain maturity date.

Sale

Amortized Cost

Amortized Cost

Due in one year or less

$

58,288

$

57,421

$

227,073

$

224,454

Due after one year through five years

298,624

294,770

8,426

8,297

Due after five year through ten years

16,353

14,603

62,904

53,628

227,100

216,160

107,138

104,938

8,097

8,097

Total

$

551,404

$

533,457

$

462,599

$

448,911

Unrealized Losses on Investment Securities.

The following table summarizes the available for sale and held to maturity investment

securities with unrealized losses aggregated by major security type and length

of time in a continuous unrealized loss position:

Less Than

Greater Than

12 Months

12 Months

Total

Fair

Fair

Fair

Value

Losses

Value

Losses

Value

Losses

Sale

$

28,929

$

$

11,742

$

$

40,671

$

41,132

93,868

3,402

135,000

3,666

1,622

34,125

2,642

35,747

2,708

53,545

9,277

53,584

9,277

1,077

47,393

3,012

48,470

3,080

Total

$

72,799

$

$

240,673

$

18,682

$

313,472

$

19,094

232,751

2,748

232,751

2,748

50,264

110,114

10,972

160,378

11,176

Total

$

50,264

$

$

342,865

$

13,720

$

393,129

$

13,924

Sale

$

81,363

$

$

14,510

$

$

95,873

$

33,155

100,844

5,394

133,999

5,578

2,728

36,654

3,663

39,382

3,827

55,409

10,902

55,463

10,902

3,093

48,369

4,195

51,462

4,444

Total

$

120,393

$

$

255,786

$

24,770

$

376,179

$

25,685

361,529

6,476

361,529

6,476

58,230

1,000

119,353

15,235

177,583

16,235

Total

$

58,230

$

1,000

$

480,882

$

21,711

$

539,112

$

22,711

At June 30, 2025, there were

positions (combined AFS and HTM) with unrealized pre-tax losses totaling $

33.0

of

these positions are U.S. Treasury bonds

and carry the full faith and credit of the U.S. Government.

are U.S. government agency

securities issued by U.S. government sponsored entities.

We believe

the long history of no credit losses on government securities

indicates that the expectation of nonpayment of the amortized cost basis is effectively

zero.

At June 30, 2025, all collateralized

mortgage obligation securities, mortgage-backed securities, Small Business

Administration securities, U.S. Agency,

and U.S. Treasury

bonds held were AAA rated.

The remaining

positions (municipal securities and corporate bonds) have a credit component.

At

June 30, 2025, corporate debt securities had an allowance for credit losses of

$

69,000

and municipal securities had an allowance of

less than $

1,000

. None of the securities held by the Company were past due or in nonaccrual status at June 30,

Credit Quality Indicators

The Company monitors the credit quality of its investment securities through

various risk management procedures, including the

monitoring of credit ratings.

A majority of the debt securities in the Company’s

investment portfolio were issued by a U.S.

government entity or agency and are either explicitly or implicitly guaranteed

by the U.S. government.

The Company believes the

long history of no credit losses on these securities indicates that the expectation

of nonpayment of the amortized cost basis is

effectively zero, even if the U.S. government were

to technically default.

Further, certain municipal securities held by the Company

have been pre-refunded and secured by government guaranteed

treasuries.

Therefore, for the aforementioned securities, the Company

does

no

t assess or record expected credit losses due to the zero loss assumption.

The Company monitors the credit quality of its

municipal and corporate securities portfolio via credit ratings

which are updated on a quarterly basis.

On a quarterly basis, municipal

and corporate securities in an unrealized loss position are evaluated to determine

if the loss is attributable to credit related factors and

if an allowance for credit loss is needed.

NOTE 3 – LOANS HELD FOR INVESTMENT AND ALLOWANCE

FOR CREDIT LOSSES

Loan Portfolio Composition

.

The composition of the held for investment (“HFI”) loan portfolio was as follows:

$

180,008

$

189,208

174,115

219,994

802,504

779,095

(1)

228,201

220,064

(2)

198,742

200,685

Loans Held For Investment, Net of Unearned Income

$

$

(1)

Includes loans in process balances of $

1.6

13.6

(2)

Includes overdraft balances of $

1.3

1.2

Net deferred loan costs, which include premiums on purchased loans,

included in loans were $

8.5

million at June 30, 2025 and $

8.3

million at December 31, 2024.

Accrued interest receivable on loans which is excluded from amortized

cost totaled $

8.1

million at June 30, 2025 and $

10.3

million at

December 31, 2024, and is reported separately in Other Assets.

The Company has pledged a blanket floating lien on all 1-4 family residential mortgage

loans, commercial real estate mortgage loans,

and home equity loans to support available borrowing capacity at the FHLB of

Atlanta and has pledged a blanket floating lien on all

consumer loans, commercial loans, and construction loans to support available

borrowing capacity at the Federal Reserve Bank of

Atlanta.

.

The methodology for estimating the amount of credit losses reported in the

allowance for credit losses

(“ACL”) has two basic components: first, an asset-specific component

involving loans that do not share risk characteristics and the

measurement of expected credit losses for such individual loans; and second,

a pooled component for expected credit losses for pools

of loans that share similar risk characteristics.

This allowance methodology is discussed further in Note 1 – Significant

Accounting

Policies in the Company’s 2024 Form

10-K.

The following table details the activity in the allowance for credit losses by

portfolio segment.

Allocation of a portion of the

allowance to one category of loans does not preclude its availability to

absorb losses in other categories.

Commercial,

Financial,

Commercial

Agricultural

Construction

Mortgage

Residential

Home Equity

Total

$

1,468

$

2,233

$

6,061

$

14,885

$

2,029

$

3,058

$

29,734

(86)

(422)

(33)

(74)

(49)

(24)

(1,351)

(1,498)

(673)

(590)

$

1,425

$

1,811

$

6,256

$

15,264

$

2,014

$

3,092

$

29,862

$

1,514

$

2,384

$

5,867

$

14,568

$

1,952

$

2,966

$

29,251

(39)

(573)

1,429

1,801

(242)

(57)

(24)

(2,786)

(3,109)

1,483

1,919

(50)

(1,303)

(1,190)

$

1,425

$

1,811

$

6,256

$

15,264

$

2,014

$

3,092

$

29,862

June 30, 2024

$

1,525

$

1,869

$

5,947

$

14,828

$

1,896

$

3,264

$

29,329

(118)

(63)

(68)

1,129

(400)

(1,632)

(2,032)

(341)

(977)

(1,239)

$

1,575

$

1,751

$

6,076

$

14,788

$

1,865

$

3,164

$

29,219

June 30, 2024

$

1,482

$

2,502

$

5,782

$

15,056

$

1,818

$

3,301

$

29,941

(751)

(311)

2,265

2,011

(682)

(17)

(76)

(3,820)

(4,595)

1,418

1,862

(582)

(15)

(2,402)

(2,733)

$

1,575

$

1,751

$

6,076

$

14,788

$

1,865

$

3,164

$

29,219

For the six months ended June 30, 2025, the allowance for loans HFI increased by $

0.6

million and reflected a provision expense of

$

1.8

million and net loan charge-offs of $

1.2

The increase in the allowance over December 31, 2024 was primarily

attributable to qualitative factor adjustments that were partially offset

by lower loan balances.

For the six months ended June 30,

2024, the allowance for loans HFI decreased by $

0.7

million and reflected a provision expense of $

2.0

million and net loan charge-

offs of $

2.7

The decrease in the allowance was primarily due to lower loan balances.

Four unemployment forecast scenarios

were utilized to estimate probability of default and are weighted based on management’s

estimate of probability.

See Note 8 –

Commitments and Contingencies for information on the

allowance for off-balance sheet credit commitments.

Loan Portfolio Aging.

A loan is defined as a past due loan when one full payment is past due or a contractual maturity

is over 30 days

past due (“DPD”).

The following table presents the aging of the amortized cost basis in accruing

past due loans by class of loans.

30-59

60-89

90 +

Total

Total

Total

DPD

DPD

DPD

Past Due

Current

Loans

Loans

$

$

$

$

$

179,327

$

$

180,008

174,115

174,115

800,335

1,404

802,504

1,319

1,622

1,044,753

1,545

225,343

2,591

228,201

1,269

1,507

196,645

198,742

Total

$

2,863

$

1,660

$

$

4,523

$

2,620,518

$

6,449

$

$

$

$

$

$

188,781

$

$

189,208

219,994

219,994

777,710

779,095

1,038,694

3,127

218,160

1,782

220,064

2,154

2,297

197,598

200,685

Total

$

3,520

$

$

$

4,311

$

2,640,937

$

6,302

$

Nonaccrual Loans

.

Loans are generally placed on nonaccrual status if principal or interest payments

become 90 days past due and/or

management deems the collectability of the principal and/or interest to

be doubtful.

Loans are returned to accrual status when the

principal and interest amounts contractually due are brought current

or when future payments are reasonably assured.

The following table presents the amortized cost basis of loans in nonaccrual

status and loans past due over 90 days and still on accrual

by class of loans.

With No

With

90 + Days

With No

With

90 + Days

ACL

ACL

Still Accruing

ACL

ACL

Still Accruing

$

$

$

$

$

$

1,403

2,046

1,081

2,440

1,273

Total Nonaccrual

Loans

$

4,811

$

1,638

$

$

2,982

$

3,320

$

Collateral Dependent Loans.

The following table presents the amortized cost basis of collateral-dependent

loans.

Non Real Estate

Non Real Estate

Secured

Secured

Secured

Secured

$

$

1,210

$

$

2,192

2,694

2,476

1,166

Total Collateral Dependent

Loans

$

6,052

$

1,210

$

3,554

$

A loan is collateral dependent when the borrower is experiencing financial

difficulty and repayment of the loan is dependent on

the

sale or operation of the underlying collateral.

The Bank’s collateral dependent

loan portfolio is comprised primarily of real estate secured loans, collateralized

by either residential

or commercial collateral types.

The loans are carried at fair value based on current values determined by

either independent appraisals

or internal evaluations, adjusted for selling costs or other amounts to be deducted

when estimating expected net sales proceeds.

Residential Real Estate Loans In Process of Foreclosure

.

At June 30, 2025, the Company had $

0.2

million of 1-4 family residential

real estate loans for which formal foreclosure proceedings were in process, compared

to $

0.5

million at December 31, 2024.

Modifications to Borrowers Experiencing

Financial Difficulty.

Occasionally, the Company may

modify loans to borrowers who are

experiencing financial difficulty.

Loan modifications to borrowers in financial difficulty are loans in

which the Company has granted

an economic concession to the borrower that it would not otherwise consider.

In these instances, as part of a work-out alternative, the

Company will make concessions including the extension of the loan

term, a principal moratorium, a reduction in the interest rate, or a

combination thereof.

The impact of the modifications and defaults are factored into the allowance for credit

losses on a loan-by-loan

basis.

Thus, specific reserves are established based upon the results of either a

discounted cash flow analysis or the underlying

collateral value, if the loan is deemed to be collateral dependent.

A modified loan classification can be removed if the borrower’s

financial condition improves such that the borrower is no longer in financial difficulty,

the loan has not had any forgiveness of

principal or interest, and the loan is subsequently refinanced or restructured

at market terms and qualifies as a new loan.

At June 30, 2025 and December 31, 2024, the Company maintained

one

modified commercial mortgage loan due to a borrower

experiencing financial difficulty.

The Company reduced the interest rate on the loan by

% in addition to extending the term of the

loan from

to

years.

The balance of the nonaccrual loan at June 30, 2025 and December 31, 2024 was $

0.3

million and did not

have a payment delay.

No

new modifications to borrowers experiencing financial difficulty

were made during the six months ended

June 30, 2025 and 2024.

Credit Risk Management

.

The Company has adopted comprehensive lending policies, underwriting standards and

loan review

procedures designed to maximize loan income within an acceptable

level of risk.

Management and the Board of Directors review and

approve these policies and procedures on a regular basis (at least annually).

Reporting systems are used to monitor loan originations, loan quality,

concentrations of credit, loan delinquencies and nonperforming

loans and potential problem loans.

Management and the Credit Risk Oversight Committee periodically

review the Company’s lines

of business to monitor asset quality trends and the appropriateness of credit policies.

In addition, total borrower exposure limits are

established and concentration risk is monitored.

As part of this process, the overall composition of the portfolio is reviewed to gauge

diversification of risk, client concentrations, industry group, loan

type, geographic area, or other relevant classifications of loans.

Specific segments of the loan portfolio are monitored and reported

to the Board on a quarterly basis and have strategic plans in place

to supplement Board approved credit policies governing exposure

limits and underwriting standards.

Detailed below are the types of

loans within the Company’s

loan portfolio and risk characteristics unique to each.

Commercial, Financial, and Agricultural – Loans in this category

are primarily made based on identified cash flows of the borrower

with consideration given to underlying collateral and personal or

other guarantees.

Lending policy establishes debt service coverage

ratio limits that require a borrower’s cash flow to be sufficient

to cover principal and interest payments on all new and existing debt.

The majority of these loans are secured by the assets being financed or other business

assets such as accounts receivable, inventory,

or

equipment.

Loan to value ratios at origination are

governed by established policy guidelines.

Real Estate Construction – Loans in this category consist of short-term

construction loans, revolving and non-revolving credit lines

and construction/permanent loans made to individuals and investors to

finance the acquisition, development, construction or

rehabilitation of real property.

These loans are primarily made based on identified cash flows of the borrower

or project and generally

secured by the property being financed, including 1-4 family residential

properties and commercial properties that are either owner-

occupied or investment in nature.

These properties may include either vacant or improved property.

Construction loans are generally

based upon estimates of costs and value associated with the completed

project.

Collateral values are determined based upon third

party appraisals and evaluations.

Loan to value ratios at origination are governed by established policy

guidelines.

The disbursement

of funds for construction loans is made in relation to the progress of the project

and as such these loans are closely monitored by on-

site inspections.

Real Estate Commercial Mortgage – Loans in this category consists of commercial

mortgage loans secured by property that is either

owner-occupied or investment in nature.

These loans are primarily made based on identified cash flows of the borrower or

project

with consideration given to underlying real estate collateral and

personal guarantees.

Lending policy establishes debt service

coverage ratios and loan to value ratios specific to the property type.

Collateral values are determined based upon third party

appraisals and evaluations.

Real Estate Residential – Residential mortgage loans held in the Company’s

loan portfolio are made to borrowers that demonstrate the

ability to make scheduled payments with full consideration to underwriting

factors such as current income, employment status, current

assets, and other financial resources, credit history,

and the value of the collateral.

Collateral consists of mortgage liens on 1-4 family

residential properties.

The Company does not

originate sub-prime loans.

Real Estate Home Equity – Home equity loans and lines are made to qualified

individuals for legitimate purposes generally secured

by senior or junior mortgage liens on owner-occupied

1-4 family homes or vacation homes.

Borrower qualifications include

favorable credit history combined with supportive income and debt ratio

requirements and combined loan to value ratios within

established policy guidelines.

Consumer Loans – This loan portfolio includes personal installment loans,

direct and indirect automobile financing, and overdraft

lines of credit.

The majority of the consumer loan category consists of direct and indirect automobile

loans.

Lending policy

establishes maximum debt to income ratios, minimum credit scores, and

includes guidelines for verification of applicants’ income and

receipt of credit reports.

Credit Quality Indicators

.

As part of the ongoing monitoring of the Company’s

loan portfolio quality, management

categorizes loans

into risk categories based on relevant information about the ability of borrowers

to service their debt such as: current financial

information, historical payment performance, credit documentation,

and current economic and market trends, among other

factors.

Risk ratings are assigned to each loan and revised as needed through established monitoring

procedures for individual loan

relationships over a predetermined amount and review of smaller balance homogenous

loan pools.

The Company uses the definitions

noted below for categorizing and managing its criticized loans.

Loans categorized as “Pass” do not meet the criteria set forth below

and are not considered criticized.

Special Mention – Loans in this category are presently protected from loss, but

weaknesses are apparent which, if not corrected, could

cause future problems.

Loans in this category may not meet required underwriting criteria and

have no mitigating factors.

More than

the ordinary amount of attention is warranted for these loans.

Substandard – Loans in this category exhibit well-defined weaknesses that would

typically bring normal repayment into jeopardy.

These loans are no longer adequately protected due to well-defined

weaknesses that affect the repayment capacity of the

borrower.

The possibility of loss is much more evident and above average supervision is required

for these loans.

Doubtful – Loans in this category have all the weaknesses inherent in a loan categorized

as Substandard, with the characteristic that

the weaknesses make collection or liquidation in full, on the basis of

currently existing facts, conditions, and values, highly

questionable and improbable.

Performing/Nonperforming – Loans within certain homogenous

loan pools (home equity and consumer) are not individually reviewed,

but are monitored for credit quality via the aging status of the loan and by payment

activity.

The performing or nonperforming status

is updated on an on-going basis dependent upon improvement

and deterioration in credit quality.

The following tables summarize gross loans held for investment at June

30, 2025 and December 31, 2024 and current period gross

write-offs for the six months ended June 30, 2025 and 12 months ended

December 31, 2024 by years of origination and internally

assigned credit risk ratings (refer to Credit Risk Management section for detail

on risk rating system).

Term

Loans by Origination Year

Revolving

As of June 30, 2025

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

$

21,285

$

29,681

$

28,473

$

29,399

$

15,176

$

10,549

$

40,078

$

174,641

3,151

3,619

1,269

1,748

Total

$

21,285

$

30,105

$

31,669

$

29,682

$

15,210

$

10,660

$

41,397

$

180,008

$

$

$

$

$

$

$

$

Real Estate - Construction:

Pass

$

29,488

$

87,990

$

26,659

$

12,267

$

$

$

13,306

$

169,956

3,576

4,159

Total

$

29,488

$

87,990

$

27,242

$

15,843

$

$

$

13,306

$

174,115

Real Estate - Commercial

Mortgage:

Pass

$

39,009

$

97,387

$

113,036

$

198,192

$

102,760

$

178,711

$

33,667

$

762,762

3,922

18,373

1,120

2,871

1,065

27,567

1,402

3,658

5,762

12,175

Total

$

43,321

$

98,953

$

113,188

$

220,223

$

104,743

$

187,344

$

34,732

$

802,504

Real Estate - Residential:

Pass

$

85,110

$

141,045

$

299,506

$

340,188

$

63,490

$

95,076

$

10,416

$

1,034,831

1,060

2,118

2,543

1,690

1,421

4,695

10,971

Total

$

85,110

$

143,588

$

300,250

$

341,878

$

65,971

$

100,086

$

11,037

$

$

$

$

$

$

$

$

$

Real Estate - Home Equity:

$

1,292

$

$

$

$

$

$

223,155

$

225,610

2,591

2,591

Total

$

1,292

$

$

$

$

$

$

225,746

$

228,201

$

$

$

$

$

$

$

$

Consumer:

$

42,832

$

28,000

$

35,926

$

42,138

$

30,933

$

9,127

$

9,196

$

198,152

Total

$

42,984

$

28,000

$

35,963

$

42,352

$

31,047

$

9,200

$

9,196

$

198,742

$

1,029

$

$

$

$

$

$

$

2,786

Term

Loans by Origination Year

Revolving

As of December 31, 2024

Prior

Loans

Total

Commercial, Financial,

Agriculture:

Pass

$

35,596

$

36,435

$

37,506

$

18,433

$

4,610

$

9,743

$

41,720

$

184,043

3,979

4,760

Total

$

36,031

$

40,414

$

37,960

$

18,454

$

4,668

$

9,814

$

41,867

$

189,208

$

$

$

$

$

$

$

$

1,512

Real Estate - Construction:

Pass

$

105,148

$

73,615

$

29,821

$

$

$

$

8,288

$

217,110

1,555

1,329

2,884

Total

$

106,703

$

73,615

$

31,150

$

$

$

$

8,288

$

219,994

$

$

$

$

$

$

$

$

Real Estate - Commercial

Mortgage:

Pass

$

77,561

$

110,183

$

207,574

$

109,863

$

87,369

$

122,272

$

26,324

$

741,146

2,913

17,031

2,253

4,402

27,300

2,463

3,403

2,508

1,305

10,649

Total

$

77,732

$

115,559

$

228,008

$

110,732

$

92,130

$

127,979

$

26,955

$

779,095

$

$

$

$

$

$

$

$

Real Estate - Residential:

Pass

$

165,050

$

316,521

$

358,851

$

71,423

$

31,169

$

76,921

$

11,872

$

1,031,807

1,104

2,892

1,450

1,446

1,295

2,918

7,805

Total

$

165,050

$

317,314

$

360,301

$

73,973

$

32,932

$

80,373

$

12,561

$

$

$

$

$

$

$

$

$

Real Estate - Home Equity:

$

$

$

$

$

$

$

215,981

$

218,282

1,782

1,782

Total

$

$

$

$

$

$

$

217,763

$

220,064

$

$

$

$

$

$

$

$

Consumer:

$

32,293

$

44,995

$

55,942

$

42,002

$

10,899

$

4,116

$

9,648

$

199,895

Total

$

32,303

$

45,169

$

56,263

$

42,158

$

10,957

$

4,187

$

9,648

$

200,685

$

2,562

$

1,605

$

2,088

$

$

$

$

$

7,627

NOTE 4 – MORTGAGE BANKING ACTIVITIES

The Company’s mortgage

banking activities include mandatory delivery loan sales, forward sales contracts used

to manage residential

loan pipeline price risk, utilization of warehouse lines to fund secondary

market residential loan closings, and residential mortgage

servicing.

Residential Mortgage Loan Production

The Company originates, markets, and services conventional and

government-sponsored residential mortgage loans.

Generally,

conforming fixed rate residential mortgage loans are held for sale in the

secondary market and non-conforming and adjustable-rate

residential mortgage loans may be held for investment.

The volume of residential mortgage loans originated for sale and secondary

market prices are the primary drivers of origination revenue.

Residential mortgage loan commitments are generally outstanding for 30

to 90 days, which represents the typical period from

commitment to originate a residential mortgage loan to when the closed

loan is sold to an investor.

Residential mortgage loan

commitments are subject to both credit and price risk.

Credit risk is managed through underwriting policies and procedures, including

collateral requirements, which are generally accepted by the secondary

loan markets.

Price risk is primarily related to interest rate

fluctuations and is partially managed through forward sales of residential

mortgage-backed securities (primarily to-be announced

securities, or TBAs) or mandatory delivery commitments with investors.

The unpaid principal balance of residential mortgage loans held for sale,

notional amounts of derivative contracts related to residential

mortgage loan commitments,

such as interest rate lock commitments (“IRLC’s”)

and forward contract sales and their related fair

values are set forth below.

Unpaid Principal

Unpaid Principal

Balance/Notional

Balance/Notional

Residential Mortgage Loans Held for Sale

$

18,391

$

19,181

$

28,117

$

28,672

(1)

24,479

15,000

(2)

22,500

16,000

(1)

Recorded in other assets at fair value.

(2)

Recorded in other liabilities and other assets at fair value,

respectively.

At June 30, 2025, the Company had

no

residential mortgage loans held for sale 30-89 days past due or on nonaccrual status. At

December 31, 2024, the Company had

no

residential mortgage loans held for sale 30-89 days past due or on nonaccrual

status.

Mortgage banking revenue was as follows:

Net realized gains on sales of mortgage loans

$

3,605

$

3,159

$

6,485

$

4,835

Net change in unrealized

(loss) gain on mortgage loans held

for sale

(62)

Net change in the fair value of IRLC's

(91)

(37)

Net change in the fair value of forward sales contracts

(109)

(285)

Pair-Offs on net settlement of forward sales contracts

(169)

Mortgage servicing rights additions

Net origination fees

1,359

1,372

Total mortgage banking

revenues

$

4,190

$

4,381

$

8,010

$

7,259

Residential Mortgage Servicing

The Company may retain the right to service residential mortgage loans

sold.

The unpaid principal balance of loans serviced for

others is the primary driver of servicing revenue.

The following represents a summary of mortgage servicing rights.

Number of residential mortgage loans serviced for others

Outstanding principal balance of residential mortgage loans serviced

for others

$

123,895

$

135,416

interest rate

5.71%

5.86%

Remaining contractual term (in months)

Conforming conventional loans serviced by the Company are sold to Federal

National Mortgage Association (“FNMA”) on a non-

recourse basis, whereby foreclosure losses are generally the responsibility

of FNMA and not the Company.

The government loans

serviced by the Company are secured through the Government National

Mortgage Association (“GNMA”), whereby the Company is

insured against loss by the Federal Housing Administration or partially

guaranteed against loss by the Veterans

Administration.

At

June 30, 2025, the servicing portfolio balance consisted of the following

loan types: FNMA (

59.6

.%), GNMA (

4.3

%), and private

investor (

36.1

%).

FNMA and private investor loans are structured as actual/actual payment remittance.

At June 30, 2025 and December 31, 2024, the Company did

no

t have delinquent residential mortgage loans in GNMA pools serviced

by the Company.

The right to repurchase these loans and the corresponding liability has been recorded

in other assets and other

liabilities, respectively, in

the Consolidated Statements of Financial Condition.

The Company had

no

repurchases for the three months

ended June 30, 2025 and 2024, and $

0.3

million and

no

repurchases in the six months ended June 30, 2025 and June 30, 2024,

respectively, of

GNMA delinquent or defaulted mortgage loans with the intention to modify their terms

and include the loans in new

GNMA pools.

Activity in the capitalized mortgage servicing rights was as follows:

Beginning balance

$

$

$

$

Additions due to loans sold with servicing retained

Deletions and amortization

(43)

(46)

(88)

(108)

Ending balance

$

$

$

$

The Company did

no

t record any permanent impairment losses on mortgage servicing rights for the

three or six months ended June 30,

2025 or 2024.

The key unobservable inputs used in determining the fair value of the Company’s

mortgage servicing rights were as follows:

Minimum

Maximum

Minimum

Maximum

Discount rates

9.50%

12.00%

9.50%

12.00%

Annual prepayment speeds

9.59%

18.60%

9.14%

18.88%

Cost of servicing (per loan)

$

$

$

$

Changes in residential mortgage interest rates directly affect

the prepayment speeds used in valuing the Company’s

mortgage

servicing rights.

A separate third party model is used to estimate prepayment speeds based on interest rates, housing

turnover rates,

estimated loan curtailment, anticipated defaults, and other relevant factors.

The weighted average annual prepayment speed was

13.01

.% at June 30, 2025 and

13.44

% at December 31, 2024.

Warehouse

Line Borrowings

The Company has the following warehouse lines of credit and master repurchase

agreements with various financial institutions at June

30, 2025.

Amounts

Outstanding

$

million master repurchase agreement without defined expiration.

Interest is at the SOFR rate plus

2.25%

to

3.25%

, with a floor rate of

3.25%

to

4.25%

.

A cash pledge deposit of $

0.1

million is required by the lender.

$

12,446

$

million warehouse line of credit agreement expiring in

June 2026

.

Interest is at the SOFR plus

2.50%

to

3.00%

.

Total Warehouse

$

12,725

Warehouse

line borrowings are classified as short-term borrowings.

At December 31, 2024, warehouse line borrowings totaled $

1.9

million. At June 30, 2025, the Company had residential mortgage loans

held for sale pledged as collateral under the above warehouse

lines of credit and master repurchase agreements.

The above agreements also contain covenants which include certain financial

requirements, including maintenance of minimum tangible net worth, minimum

liquid assets, and maximum debt to net worth ratio, as

defined in the agreements. The Company was in compliance with all significant

debt covenants at June 30, 2025.

NOTE 5 – DERIVATIVES

The Company enters into derivative financial instruments to manage exposures

that arise from business activities that result in the

receipt or payment of future known and uncertain cash amounts, the value of

which are determined by interest rates.

The Company’s

derivative financial instruments are used to manage differences in

the amount, timing, and duration of the Company’s

known or

expected cash receipts and its known or expected cash payments principally

related to the Company’s subordinated

debt.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling $

million at June 30, 2025 were designed as a cash flow hedge for subordinated

debt.

Under the swap arrangement, the Company will pay a fixed interest rate of

2.50

% and receive a variable interest rate based on

three-month CME Term

SOFR (secured overnight financing rate).

For derivatives designated and that qualify as cash flow hedges of interest rate

risk, the gain or loss on the derivative is recorded in

accumulated other comprehensive income (“AOCI”) and subsequently

reclassified into interest expense in the same period(s) during

which the hedged transaction affects earnings. Amounts reported

in accumulated other comprehensive income related to derivatives

will be reclassified to interest expense as interest payments are made on the

Company’s variable-rate subordinated

debt.

The following table reflects the cash flow hedges included in the consolidated

statements of financial condition

.

Statement of Financial

Notional

Fair

Weighted Average

Condition Location

Amount

Value

Maturity (Years)

Interest rate swaps related to subordinated debt

$

30,000

$

4,130

5.0

Interest rate swaps related to subordinated debt

$

30,000

$

5,319

5.5

The following table presents the change in net gains (losses) recorded in AOCI and

the consolidated statements of income related to

the cash flow derivative instruments (interest rate swaps related to subordinated

debt).

Change in Gain

Amount of Gain

(Loss) Recognized

(Loss) Reclassified

Category

in AOCI

from AOCI to Income

Three months ended June 30, 2025

$

(363)

$

Three months ended June 30, 2024

(37)

Six months ended June 30, 2025

$

(888)

$

Six months ended June 30, 2024

The Company estimates there will be approximately $

1.0

million reclassified as a decrease to interest expense within the next 12

months.

The Company had a collateral liability of $

4.3

5.5

NOTE 6 – LEASES

Operating leases in which the Company is the lessee are recorded as operating

lease right of use (“ROU”) assets and operating

liabilities, included in other assets and liabilities, respectively,

on its Consolidated Statements of Financial Condition.

The Company’s operating

leases primarily relate to banking offices with remaining lease terms

from

less than one

to

years.

The

Company’s leases are not complex

and do not contain residual value guarantees, variable lease payments, or

significant assumptions

or judgments made in applying the requirements of Topic

Operating leases with an initial term of 12 months or less are not

recorded on the Consolidated Statements of Financial Condition and the related lease expense is recognized on a straight-line basis

over the lease term.

At June 30, 2025, the operating lease ROU assets and liabilities were $

27.6

28.2

million,

respectively. At December

31, 2024, ROU assets and liabilities were $

24.9

25.5

million, respectively.

The Company

recognized $

0.1

million of rental income during the six months ended June 30, 2025 for a lease that terminated

in February 2025.

The

Company does not have any finance leases.

The table below summarizes our lease expense and other information related

to the Company’s operating leases.

Operating lease expense

$

$

$

1,761

$

1,668

Short-term lease expense

Total lease expense

$

1,137

$

1,023

$

2,312

$

2,057

Other information:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$

$

$

1,794

$

1,494

Right-of-use assets obtained in exchange for new operating lease liabilities

1,117

3,997

remaining lease term — operating leases (in years)

15.8

16.7

15.8

16.7

discount rate — operating leases

3.7%

3.5%

3.7%

3.5%

The table below summarizes the maturity of remaining lease liabilities:

$

1,797

3,601

3,374

3,102

2,880

2030 and thereafter

21,293

Total

$

36,047

Less: Interest

(7,860)

Present Value

of Lease liability

$

28,187

A related party is the lessor in a land lease with the Company.

The payments under the lease agreement provide for annual lease

payments of approximately $

0.1

million annually through December 2033, and thereafter,

increase by

% every

years until 2053 at

which time the rent amount will adjust based on reappraisal of the parcel rental

value.

The Company then has

four

successive options

to extend the lease for

five years

each with rental increases of 5% at each extension.

The aggregate remaining obligation of the lease

totaled $

2.1

million at June 30, 2025.

NOTE 7 - EMPLOYEE BENEFIT PLANS

The Company has a defined benefit pension plan covering substantially all full-time

and eligible part-time associates and a

Supplemental Executive Retirement Plan (“SERP”) and a Supplemental

Executive Retirement Plan II (“SERP II”) covering its

executive officers.

The defined benefit plan was amended in December 2019 to remove plan eligibility

for new associates hired after

December 31, 2019.

The SERP II was adopted by the Company’s

Board on May 21, 2020 and covers certain executive officers that

were not covered by the SERP.

The components of the net periodic benefit cost for the Company’s

qualified benefit pension plan were as follows:

Service Cost

$

$

$

1,720

$

1,857

Interest Cost

1,676

1,524

3,353

3,048

Expected Return on Plan Assets

(2,264)

(2,029)

(4,529)

(4,058)

Net Loss Amortization

(414)

(827)

Net Periodic Benefit Cost

$

(142)

$

$

(283)

$

Discount Rate

5.82%

5.29%

5.82%

5.29%

Long-term Rate of Return on Assets

6.75%

6.75%

6.75%

6.75%

The components of the net periodic benefit cost for the Company’s

SERP and SERP II were as follows:

Service Cost

$

$

$

$

Interest Cost

Prior Service Cost Amortization

Net Loss Amortization

(29)

(71)

(58)

(140)

Net Periodic Benefit Cost

$

$

$

$

Discount Rate

5.57%

5.11%

5.57%

5.11%

The service cost component of net periodic benefit cost is reflected in

compensation expense in the accompanying statements of

income.

The other components of net periodic cost are included in “other” within the noninterest

expense category in the

Consolidated Statements of Income.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lending Commitments

.

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 clients.

These financial instruments consist of commitments to extend credit and standby

letters of

credit.

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.

The amounts associated with the Company’s

off-balance sheet

obligations were as follows:

Fixed

Variable

Total

Fixed

Variable

Total

Commitments to Extend Credit

(1)

$

178,568

$

493,686

$

672,254

$

184,223

$

479,191

$

663,414

Standby Letters of Credit

7,402

7,402

7,287

7,287

Total

$

185,970

$

493,686

$

679,656

$

191,510

$

479,191

$

670,701

(1)

Commitments include unfunded loans, revolving

lines of credit, and off-balance sheet residential

loan commitments.

Commitments to extend credit are agreements to lend to a client 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 client 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 client’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.

The allowance for credit losses for off-balance sheet credit commitments

that are not unconditionally cancellable by the bank is

adjusted as a provision for credit loss expense and is recorded in other liabilities.

The following table shows the activity in the

allowance.

$

1,832

$

3,121

$

2,155

$

3,191

(94)

(417)

(52)

$

1,738

$

3,139

$

1,738

$

3,139

Other Commitments.

In the normal course of business, the Company enters into lease commitments

which are classified as operating

leases. See Note 6 – Leases for additional information on the maturity of the

Company’s operating lease commitments.

The Company has an outstanding commitment of up to $

1.0

million in a bank tech venture capital fund focused on finding and

funding technology solutions for community banks.

At June 30, 2025, the amount remaining to be funded for the bank tech venture

capital commitment was $

0.3

Contingencies

.

The Company is a party to lawsuits and claims arising out of the normal course of business.

In management's opinion,

there are

no

known pending claims or litigation, the outcome of which would, individually or in

the aggregate, have a material effect

on the consolidated results of operations, financial position, or cash flows

of the Company.

Indemnification Obligation

.

The Company is a member of the Visa U.S.A. network.

Visa U.S.A member banks are

required to

indemnify the Visa U.S.A.

network for potential future settlement of certain litigation (the “Covered Litigation”)

that relates to several

antitrust lawsuits challenging the practices of Visa

and MasterCard International.

In 2008, the Company, as a member

of the Visa

U.S.A. network, obtained Class B shares of Visa,

Inc. upon its initial public offering.

Since its initial public offering, Visa,

Inc. has

funded a litigation reserve for the Covered Litigation resulting in a reduction

in the Class B shares held by the Company.

In 2011, the

Company sold its remaining Class B shares.

Associated with this sale, the Company entered into a swap contract with the purchaser

of the shares that requires a payment to the counterparty in the event that Visa,

Inc. makes subsequent revisions to the conversion

ratio.

Conversion ratio payments and ongoing fixed quarterly charges are reflected

in earnings in the period incurred.

Fixed charges

included in the swap liability are payable quarterly until the litigation reserve

is fully liquidated and at which time the aforementioned

swap contract will be terminated.

Quarterly fixed payments are approximately $

0.2

NOTE 9 – FAIR VALUE

MEASUREMENTS

The fair value of an asset or liability is the price that would be received to sell that asset or paid

to transfer that liability in an orderly

transaction occurring in the principal market (or most advantageous market in

the absence of a principal market) for such asset or

liability.

In estimating fair value, the Company utilizes valuation techniques that are consistent with

the market approach, the income

approach and/or the cost approach.

Such valuation techniques are consistently applied.

Inputs to valuation techniques include the

assumptions that market participants would use in pricing an asset or liability.

Accounting Standards Codification Topic

establishes a fair value hierarchy for valuation inputs that gives the highest priority

to quoted prices in active markets for identical

assets or liabilities and the lowest priority to unobservable inputs.

The fair value hierarchy is as follows:

●

Level 1 Inputs -

Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting

entity has the

ability to access at the measurement date

.

●

Level 2 Inputs -

Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,

either directly

or indirectly. These might

include quoted prices for similar assets or liabilities in active markets, quoted prices

for identical

or similar assets or liabilities in markets that are not active, inputs other

than quoted prices that are observable for the asset or

liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.)

or inputs that are derived principally from, or

corroborated, by market data by correlation or other means

.

●

Level 3 Inputs -

Unobservable inputs for determining the fair values of assets or liabilities that reflect

an entity’s own

assumptions about the assumptions that market participants would

use in pricing the assets or liabilities.

Assets and Liabilities Measured at Fair Value

on a Recurring Basis

Securities Available for Sale.

U.S. Treasury securities are reported at fair value

utilizing Level 1 inputs.

Other securities classified as

available for sale are reported at fair value utilizing Level 2 inputs.

For these securities, the Company obtains fair value measurements

from an independent pricing service.

The fair value measurements consider observable data that may include dealer quotes,

market

spreads, cash flows, the U.S. Treasury yield curve,

live trading levels, trade execution data, credit information and the bond’s

terms

and conditions, among other things.

In general, the Company does not purchase securities that have a complicated structure.

The Company’s entire portfolio consists

of

traditional investments, nearly all of which are U.S. Treasury

obligations, federal agency bullet or mortgage pass-through

securities, or

general obligation or revenue-based municipal bonds.

Pricing for such instruments is easily obtained.

At least annually, the Company

will validate prices supplied by the independent pricing service by compari

ng them to prices obtained from an independent third-party

source.

Equity Securities.

Investment securities classified as equity securities are carried at cost and

the share of earnings or losses is reported

through net income as an adjustment to the investment balance. These securities are not

readily marketable and therefore are classified

as a Level 3 input within the fair value hierarchy.

.

The fair value of residential mortgage loans held for sale based on Level 2 inputs is determined,

when possible,

using either quoted secondary-market prices or investor commitments.

If no such quoted price exists, the fair value is determined

using quoted prices for a similar asset or assets, adjusted for the specific attributes of

that loan, which would be used by other market

participants.

The Company has elected the fair value option accounting for its held for sale loans.

Mortgage Banking Derivative Instruments.

The fair values of interest rate lock commitments (“IRLCs”) are derived by valuation

models incorporating market pricing for instruments with similar characteristics,

commonly referred to as best execution pricing, or

investor commitment prices for best effort IRLCs which have

unobservable inputs, such as an estimate of the fair value of the

servicing rights expected to be recorded upon sale of the loans, net estimated costs to originate

the loans, and the pull-through rate,

and are therefore classified as Level 3 within the fair value hierarchy.

The fair value of forward sale commitments is based on

observable market pricing for similar instruments and are therefore

classified as Level 2 within the fair value hierarchy.

Interest Rate Swap.

The Company’s derivative positions

are classified as Level 2 within the fair value hierarchy and are valued

using

models generally accepted in the financial services industry and

that use actively quoted or observable market input values from

external market data providers.

The fair value derivatives are determined using discounted cash flow models.

Swap

.

The Company entered into a stand-alone derivative contract with the purchaser of

its Visa Class B shares.

The

valuation represents the amount due and payable to the counterparty based upon

the revised share conversion rate, if any,

during the

period. The Company’s

derivative positions are classified as Level 2 within the fair value hierarchy and use

actively quoted or

observable market input values from external market data providers.

At June 30, 2025 and December 31, 2024, there were

no

amounts payable.

A summary of fair values for assets and liabilities recorded at fair

value on a recurring basis consisted of the following:

Level 1

Level 2

Level 3

Total

Fair

Inputs

Inputs

Inputs

Value

ASSETS:

Sale:

$

222,321

$

$

$

222,321

163,068

163,068

37,873

37,873

53,628

53,628

48,470

48,470

3,242

3,242

19,181

19,181

Interest Rate Swap Derivative

4,130

4,130

ASSETS:

Sale:

$

105,801

$

$

$

105,801

143,127

143,127

39,382

39,382

55,477

55,477

51,462

51,462

2,399

2,399

28,672

28,672

Interest Rate Swap Derivative

5,319

5,319

Mortgage Banking Activities

.

The Company had Level 3 issuances and transfers related to mortgage banking

activities of $

4.3

million

and $

8.4

million, respectively, for the six months

ended June 30, 2025, and $

4.1

7.1

million, respectively,

for the six

months ended June 30, 2024.

Issuances are valued based on the change in fair value of the underlying

mortgage loan from inception

of the IRLC to the Consolidated Statement of Financial Condition date,

adjusted for pull-through rates and costs to originate.

IRLCs

transferred out of Level 3 represent IRLCs that were funded and moved

to mortgage loans held for sale, at fair value.

Assets Measured at Fair Value

on a Non-Recurring Basis

Certain assets are measured at fair value on a non-recurring basis (i.e., the

assets are not measured at fair value on an ongoing basis

but are subject to fair value adjustments in certain circumstances).

An example would be assets exhibiting evidence of impairment.

The following is a description of valuation methodologies used for assets measured

on a non-recurring basis.

Collateral Dependent Loans

.

Impairment for collateral dependent loans is measured using the fair

value of the collateral less selling

costs.

The fair value of collateral is determined by an independent valuation

or professional appraisal in conformance with banking

regulations.

Collateral values are estimated using Level 3 inputs due to the volatility in the real estate market,

and the judgment and

estimation involved in the real estate appraisal process.

Collateral dependent loans are reviewed and evaluated on at least a quarterly

basis for additional impairment and adjusted accordingly.

Valuation

techniques are consistent with those techniques applied in prior

periods.

Collateral-dependent loans had a carrying value of $

7.3

million with

no

valuation allowance at June 30, 2025 and a carrying

value of $

3.6

million and a $

0.1

million valuation allowance at December 31, 2024.

Other Real Estate Owned

.

During the first six months of 2025, certain foreclosed assets, upon initial recognition,

were measured and

reported at fair value through a charge-off

to the allowance for credit losses based on the fair value of the foreclosed asset less

estimated cost to sell.

The fair value of the foreclosed asset is determined by an independent valuation or

professional appraisal in

conformance with banking regulations.

On an ongoing basis, we obtain updated appraisals on foreclosed assets and realize valuation

adjustments as necessary.

The fair value of foreclosed assets is estimated using Level 3 inputs due to the judgment

and estimation

involved in the real estate valuation process.

.

Residential mortgage loan servicing rights are evaluated for impairment

at each reporting period based

upon the fair value of the rights as compared to the carrying amount.

Fair value is determined by a third party valuation model using

estimated prepayment speeds of the underlying mortgage loans serviced and

stratifications based on the risk characteristics of the

underlying loans (predominantly loan type and note interest rate).

The fair value is estimated using Level 3 inputs, including a

discount rate, weighted average prepayment speed, and the cost of loan

servicing.

Further detail on the key inputs utilized are

provided in Note 4 – Mortgage Banking Activities.

At each of June 30, 2025 and December 31, 2024, there was

no

valuation

allowance for loan servicing rights.

Assets and Liabilities Disclosed at Fair Value

The Company is required to disclose the estimated fair value of financial instruments,

both assets and liabilities, for which it is

practical to estimate fair value and the following is a description of valuation

methodologies used for those assets and liabilities.

Cash and Short-Term

Investments.

The carrying amount of cash and short-term investments is used to approximate

fair value, given

the short time frame to maturity and as such assets do not present unanticipated

credit concerns.

Securities Held to Maturity

.

Securities held to maturity are valued in accordance with the methodology previously

noted in the

caption “Assets and Liabilities Measured at Fair Value

on a Recurring Basis – Securities Available

for Sale.”

Other Equity Securities.

Other equity securities are accounted for under the equity method (Topic

323. and recorded at cost.

These

securities are not readily marketable securities and are reflected in Other

Assets on the Statement of Financial Condition.

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 values reported reflect the incorporation of a liquidity

discount to meet the objective of “exit price” valuation.

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 present

value techniques and rates currently offered for deposits of

similar remaining maturities.

Subordinated Notes Payable.

The fair value of each note is calculated using present value techniques,

based upon projected cash

flows and estimated discount rates as well as rates being offered

for similar obligations.

and Long-Term

Borrowings.

The fair value of each note is calculated using present value techniques,

based upon

projected cash flows and estimated discount rates as well as rates being offered

for similar debt.

A summary of estimated fair values of significant financial instruments not

recorded at fair value consisted of the following:

Carrying

Level 1

Level 2

Level 3

Value

Inputs

Inputs

Inputs

ASSETS:

Cash

$

78,485

$

78,485

$

$

Fed Funds Sold and Interest Bearing Deposits

394,917

394,917

Investment Securities, Held to Maturity

462,599

232,751

216,160

Other Equity Securities

(1)

3,242

3,242

1,465

Loans, Net of Allowance for Credit Losses

2,601,628

2,468,513

$

3,704,853

$

$

3,077,764

$

34,541

34,092

42,582

39,537

Long-Term Borrowings

Carrying

Level 1

Level 2

Level 3

Value

Inputs

Inputs

Inputs

ASSETS:

Cash

$

70,543

$

70,543

$

$

Fed Funds Sold and Interest Bearing Deposits

321,311

321,311

Investment Securities, Held to Maturity

567,155

361,529

182,931

Other Equity Securities

(1)

2,848

2,848

1,616

Loans, Net of Allowance for Credit Losses

2,622,299

2,457,883

$

3,671,977

$

$

3,046,926

$

28,304

28,304

52,887

42,530

Long-Term Borrowings

(1)

Accounted for under the equity method – not readily

marketable securities – reflected in other assets.

All non-financial instruments are excluded from the above table.

The disclosures also do not include goodwill.

Accordingly, the

aggregate fair value amounts presented do not represent the underlying

value of the Company.

NOTE 10 – ACCUMULATED

OTHER COMPREHENSIVE INCOME (LOSS)

The amounts allocated to accumulated other comprehensive income

(loss) are presented in the table below.

Accumulated

Securities

Other

Available

Interest Rate

Retirement

Comprehensive

for Sale

Swap

Plans

(Loss) Income

Balance as of January 1, 2025

$

(20,179)

$

3,971

$

9,722

$

(6,486)

Other comprehensive income (loss) during the period

6,434

(888)

5,546

Balance as of June 30, 2025

$

(13,745)

$

3,083

$

9,722

$

(940)

Balance as of January 1, 2024

$

(25,691)

$

3,970

$

(425)

$

(22,146)

Other comprehensive income during the period

1,181

1,470

Balance as of June 30, 2024

$

(24,510)

$

4,259

$

(425)

$

Note 11 - SEGMENT REPORTING

The Company operates a single reportable business segment that is comprised

of commercial banking within the states of Florida,

Georgia, and Alabama.

The Company’s chief executive

officer is deemed the Chief Operating Decision Maker (“CODM”). The

CODM evaluates the financial performance of the Company by evaluating

revenue streams, significant expenses, and budget to actual

results in assessing the Company’s

single reporting segment and in the determination of allocating resources. The

CODM uses

consolidated net income to benchmark the Company against peers and to evaluate

performance and allocate resources.

Significant

revenue and expense categories evaluated by the CODM are consistent with the presentation

of the Consolidated Statement of Income

and components of other noninterest expense.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS

OF

OPERATIONS

Management’s discussion

and analysis (“MD&A”) provides supplemental information, which sets forth

the major factors that have

affected our financial condition and results of operations

and should be read in conjunction with the Consolidated Financial

Statements and related notes.

The following information should provide a better understanding of

the major factors and trends that

affect our earnings performance and financial condition,

and how our performance during the second quarter of 2025 compares with

prior periods.

Throughout this section, Capital City Bank Group, Inc., and subsidiaries, collectively,

is referred to as “CCBG,”

“Company,”

“we,” “us,” or “our.”

CAUTION CONCERNING FORWARD

-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including this MD&A section, contains

“forward-looking statements”

within the meaning of the

Private Securities Litigation Reform Act of 1995.

These forward-looking statements include, among others, statements about

our

beliefs, plans, objectives, goals, expectations, estimates and intentions that are

subject to significant risks and uncertainties and are

subject to change based on various factors, many of which are beyond

our control.

The words “may,”

“could,” “should,” “would,”

“believe,” “anticipate,” “contemplate,”

“estimate,” “expect,” “intend,” “plan,” “point to,” “project,” “target,”

“vision,” “goal,”

“continue,” “further,” and similar expressions

are intended to identify forward-looking statements.

All forward-looking statements, by their nature, are subject to risks and uncertainties.

Our actual future results may differ materially

from those set forth in our forward-looking statements.

Please see the Introductory Note of this quarterly report on Form 10-Q

as well

as the Introductory Note and

of our 2024 Form 10-K, as updated in our subsequent quarterly reports filed

on

Form 10-Q, and in our other filings made from time to time with the SEC after the date

of this report.

However, other factors besides those listed in our

Quarterly Report or in our Annual Report also could adversely affect our

results,

and you should not consider any such list of factors to be a complete set of all potential risks or

uncertainties.

Any forward-looking

statements made by us or on our behalf speak only as of the date they are made.

We do not undertake to

update any forward-looking

statement, except as required by applicable law.

BUSINESS OVERVIEW

We are a financial

holding company headquartered in Tallahassee,

Florida, and we are the parent of our wholly owned subsidiary,

Capital City Bank (the “Bank” or “CCB”).

We offer

a broad array of products and services through a total of 62 full-service offices

and 107 ATMs/ITMs

located in Florida, Georgia, and Alabama.

Through Capital City Home Loans, LLC (“CCHL”), we have 27

additional offices in the Southeast for our mortgage banking business.

We provide

a full range of banking services, including

traditional deposit and credit services, mortgage banking, asset management,

trust, merchant services, bankcards, securities brokerage

services and financial advisory services, including life insurance products

,

risk management and asset protection services.

Our profitability, like

most financial institutions, is dependent to a large extent upon net

interest income, which is the difference

between the interest and fees received on interest earning assets, such as loans and

securities, and the interest paid on interest-bearing

liabilities, principally deposits and borrowings.

Results of operations are also affected by the provision for credit losses, operating

expenses such as salaries and employee benefits, occupancy and other

operating expenses including income taxes, and noninterest

income such as mortgage banking revenues, wealth management fees,

deposit fees, and bank card fees.

We have included

a detailed discussion of our long-term strategic objectives as part of the MD&A section

of our 2024 Form 10-K.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

We present a tangible

common equity ratio and a tangible book value per diluted share that, in each case, removes the

effect of

goodwill and other intangibles that resulted from merger

and acquisition activity. We

believe these measures are useful to investors

because they allow investors to more easily compare our capital adequacy

to other companies in the industry.

Non-GAAP financial

measures should not be considered alternatives to generally accepted

accounting principles (“GAAP”)-basis financial statements and

other bank holding companies may define or calculate these non-GAAP measures

or similar measures differently.

The GAAP to non-GAAP reconciliation for each quarter presented is provided

below.

(Dollars in Thousands, except per share data)

Second

First

Fourth

Third

Second

Shareowners' Equity (GAAP)

$

526,423

$

512,575

$

495,317

$

476,499

$

460,999

Less: Goodwill and Other Intangibles (GAAP)

92,693

92,733

92,773

92,813

92,853

Tangible Shareowners' Equity (non-GAAP)

A

433,730

419,842

402,544

383,686

368,146

Total Assets (GAAP)

4,461,233

4,225,316

4,225,695

Less: Goodwill and Other Intangibles (GAAP)

92,693

92,733

92,773

92,813

92,853

Tangible Assets (non-GAAP)

B

$

4,299,060

$

4,368,500

$

4,232,159

$

4,132,503

$

4,132,842

Tangible Common Equity Ratio (non-GAAP)

A/B

10.09%

9.61%

9.51%

9.28%

8.91%

Actual Diluted Shares Outstanding (GAAP)

C

17,097,986

17,072,330

17,018,122

16,980,686

16,970,228

Tangible Book Value

per Diluted Share (non-GAAP)

A/C

25.37

24.59

23.65

22.60

21.69

SELECTED QUARTERLY

FINANCIAL DATA

(UNAUDITED)

(Dollars in Thousands, Except Per Share Data)

Second

First

Fourth

Third

Second

Summary of Operations

:

Interest Income

$

51,459

$

49,782

$

49,743

$

49,328

$

48,766

Interest Expense

8,275

8,235

8,640

9,117

9,497

43,184

41,547

41,103

40,211

39,269

1,206

1,204

Net Interest Income After

42,564

40,779

40,402

39,005

38,065

20,014

19,907

18,760

19,513

19,606

42,538

38,701

41,782

42,921

40,441

Income Before Income Taxes

20,040

21,985

17,380

15,597

17,230

4,996

5,127

4,219

2,980

3,189

(Income) Loss Attributable to NCI

(71)

Net Income Attributable to CCBG

15,044

16,858

13,090

13,118

14,150

Net Interest Income (FTE)

(1)

43,228

41,591

41,150

40,260

39,334

Per Common Share

:

Net Income Basic

$

0.88

$

0.99

$

0.77

$

0.77

$

0.84

Net Income Diluted

0.88

0.99

0.77

0.77

0.83

Cash Dividends Declared

0.24

0.24

0.23

0.23

0.21

Diluted Book Value

30.79

30.02

29.11

28.06

27.17

Diluted Tangible Book Value

(2)

25.37

24.59

23.65

22.60

21.69

Market Price:

High

39.82

38.27

40.86

36.67

28.58

Low

32.38

33.00

33.00

26.72

25.45

Close

39.35

35.96

36.65

35.29

28.44

Selected Average Balances

:

Investment Securities

$

1,007,981

$

982,330

$

915,202

$

908,456

$

919,832

2,652,572

2,665,910

2,677,396

2,693,533

2,726,748

Earning Assets

4,032,008

3,993,914

3,921,900

3,883,414

3,935,280

Total Assets

4,335,033

4,259,669

4,215,862

3,680,707

3,665,482

3,600,424

3,572,034

3,641,028

Shareowners’ Equity

527,583

513,401

491,143

480,137

465,297

Common Equivalent Average Shares:

Basic

17,056

17,027

16,946

16,943

16,931

Diluted

17,088

17,044

16,990

16,979

16,960

Performance Ratios:

Return on Average Assets (annualized)

1.38

%

1.58

%

1.22

%

1.24

%

1.33

%

Return on Average Equity (annualized)

11.44

13.32

10.60

10.87

12.23

Net Interest Margin (FTE)

4.30

4.22

4.17

4.12

4.02

Noninterest Income as % of Operating Revenue

31.67

32.39

31.34

32.67

33.30

Efficiency Ratio

67.26

62.93

69.74

71.81

68.61

Asset Quality:

Allowance for Credit Losses (“ACL”)

$

29,862

$

29,734

$

29,251

$

29,836

$

29,219

Nonperforming Assets (“NPAs”)

6,581

4,428

6,669

7,242

6,165

ACL to Loans HFI

1.13

%

1.12

%

1.10

%

1.11

%

1.09

%

NPAs to Total

Assets

0.15

0.10

0.15

0.17

0.15

NPAs to Loans HFI plus OREO

0.25

0.17

0.25

0.27

0.23

ACL to Non-Performing Loans

463.01

692.10

464.14

452.64

529.79

Net Charge-Offs to Average Loans HFI

0.09

0.09

0.25

0.19

0.18

Capital Ratios:

Tier 1 Capital

18.38

%

18.01

%

17.46

%

16.77

%

16.31

%

Total Capital

19.60

19.20

18.64

17.97

17.50

Common Equity Tier 1

16.81

16.08

15.54

14.88

14.44

Leverage

11.14

11.17

11.05

10.89

10.51

Tangible Common Equity

(2)

10.09

9.61

9.51

9.28

8.91

(1)

Fully Tax Equivalent.

(2)

Non-GAAP financial measure.

See non-GAAP reconciliation on page 33.

FINANCIAL OVERVIEW